Chapter 1Introduction

Referral of the inquiry

1.1The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 and the Capital Works (Build to Rent Misuse Tax) Bill 2024 were introduced into the House of Representatives and read a first time on 5 June 2024.[1]

1.2Pursuant to the motion agreed to by the Senate on 16 May 2024, the provisions of the bills were referred to the Senate Economics Legislation Committee (the committee) for inquiry and report by 24 June 2024.[2] The committee agreed to inquire into the bills in a single inquiry. On 24 June 2024, the Senate granted the committee an extension to report by 2 August 2024.[3]

1.3On 27 June 2024, the Senate agreed that following the introduction and first reading of the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 (the original bill) and the Capital Works (Build to Rent Misuse Tax) Bill 2024 in the Senate, the bills would be divided into two separate bills:

Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 (the bill) – containing Schedules 2 to 7 of the original bill, for inquiry and report by 2 August 2024; and

Treasury Laws Amendment (Build to Rent) Bill 2024 – containing Schedule 1 of the original bill, for inquiry and report by 4 September 2024, along with the Capital Works (Build to Rent Misuse Tax) Bill 2024.[4]

1.4The bill was introduced and read for first time on 2 July 2024, thereby giving effect to the division of the bills as above. This inquiry therefore continued with its consideration of the bill, as amended, for report by 2 August 2024.

Purpose of the bill

1.5The bill would amend several acts to extend the application of the National Credit Code to Buy Now, Pay Later (BNPL) services and provide various other measures not related to BNPL services. The amendments implementing these measures are outlined in six distinct schedules to the bill:

Schedule 2 – Buy now, pay later;

Schedule 3 – Medicare levy exemption for lump sum payments;

Schedule 4 – Multinational tax transparency, country by country reporting;

Schedule 5 – Deductible gift recipients;

Schedule 6 – National skills and workforce development payments; and

Schedule 7 – $20 000 instant asset write-off for small business entities.

1.6Schedule 1 to the original bill was removed and reconstituted into the Treasury Laws Amendment (Build to Rent) Bill 2024 by the Senate. The schedules to the bill have not been renumbered to reflect the removal of Schedule 1 from the original bill.[5]

Buy now, pay later

1.7Schedule 2 would amend the National Consumer Credit Protection Act 2009 (Credit Act) to provide appropriate and proportionate protections to consumers who use BNPL or equivalent products, while maintaining the benefits to consumers created by access to low-cost credit.[6]

1.8In his second reading speech, the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP, stated that the amendments in Schedule 2 would implement the Australian Government’s commitment to regulate BNPL as a form of consumer credit. Further, the Minister stated that these reforms would ensure that Australia’s credit laws are up to date and reflect recent developments in credit markets.[7]

1.9While recognising the advantages of BNPL products, the Minister acknowledged the importance of ensuring that they are appropriately regulated, noting the financial harm they can cause to vulnerable consumers. The Minister expanded on this point in his second reading speech:

In a study conducted by Good Shepherd in late 2022, around 73 per cent of financial counsellors said that clients have missed other payments, cut back on essentials, or even gone without them, in order to service BNPL debt. The risks of BNPL disproportionately impact vulnerable Australians, including First Nations communities and those struggling financially.[8]

1.10The Minister noted that BNPL products are not currently regulated by Australia’s national credit laws. The reforms in the bill would, according to the Minister, ensure that BNPL products are appropriately regulated and that consumers have access to the same protections enjoyed by users of similar credit products.[9] The Minister stated that the reforms struck an appropriate balance between preserving the benefits of BNPL products and addressing the risks of harm to consumers.[10]

Other measures

1.11In addition to the BNPL measures outlined in Schedule 2, the bill would implement several additional measures not related to the BNPL reforms.

Medicare levy exemption for lump sum payments

1.12Schedule 3 would amend the Medicare Levy Act 1986 (Medicare Levy Act) to change how certain eligible lump sum payments in arrears are assessed for the purposes of calculating a liability under the Medicare Levy Act.[11]

1.13In his second reading speech, the Minister stated that this measure formed part of the Australian Government’s response to the Senate Economics References Committee’s inquiry into unlawful underpayment of remuneration received by employees. This measure would ensure that taxpayers who receive an eligible lump sum payment, such as to remedy underpayment of salary or wages, do not incur an additional liability under the Medicare Levy Act.[12]

Multinational tax transparency – country by country reporting

1.14Schedule 4 would amend the Taxation Administration Act 1953 (TA Act)to require select large multinational enterprises to publish selected tax information on a country-by-country basis in certain circumstances.[13] These changes would implement the Australian Government’s election commitment to establish a public country by country (CbC) reporting regime in Australia.[14]

1.15In his second reading speech, the Minister stated that a public CbC reporting regime would provide the community with a more comprehensive understanding of how much tax multinationals pay relative to their activities. The Minister stated that these reforms represent a ‘major step forward’ for tax transparency and would contribute to improved tax integrity globally.[15]

Deductible gift recipients

1.16Schedule 5 would amend the Income Tax Assessment Act 1997 (ITA Act) to list several additional organisations as eligible recipients of tax-deductible gifts for the purposes of the ITA Act.[16]

1.17The Minister stated that this change would allow donors to claim income tax deductions for donations to listed organisations, further incentivising philanthropic giving, and supporting the not-for-profit sector.[17]

National skills and workforce development payments

1.18Schedule 6 would amend the Federal Financial Relations Act 2009 to provide Commonwealth payments to state governments in accordance with the National Skills Agreement (NSA) and any successor agreements.[18]

1.19The Minister stated that the reforms would improve the funding arrangements between the Commonwealth and the states and territories under the NSA and ensure that any Commonwealth payments were better targeted.[19]

$20 000 instant asset write-off for small business entities

1.20Schedule 7 would amend the Income Tax (Transitional Provisions) Act 1997 (IT(TP) Act) to extend the $20 000 instant asset write-off by 12 months until 30 June 2025.[20]

1.21The Minister stated that, under this change, approximately 4 million small business with an aggregated annual turnover of less than $10 million will be able to immediately deduct eligible assets costing less than $20 000 until 30 June 2025. The Minister stated that this measure builds on the Government's ‘record of delivery for Australia’s small businesses’.[21]

Provisions of the bill

Overview of the amendments

Schedule 2 – Buy now, pay later

1.22Schedule 2 would provide appropriate and proportionate protections for consumers of BNPL products while maintaining the benefits of these credit products. The amendments would extend the application of the National Credit Code, as set out in Schedule 1 of the Credit Act, to BNPL contracts. Schedule 2 would also establish low-cost credit contracts (LCCCs) as a new category of regulated credit.[22]

Low-cost credit contracts for BNPL providers

1.23The legislation defines an LCCC as a BNPL contract or another kind of contract prescribed by the regulations, under which credit may be provided, and which satisfies prescribed requirements relating to fees, charges and other matters.[23] BNPL arrangements capture an arrangement where the merchant supplied goods or services to a consumer, under which a third person (the BNPL provider) pays the merchant an amount that is some or all of the price of the good or service; and where there is a contract between the BNPL provider and the consumer under which the BNPL provider provides credit to the consumer for the good or service.[24] Most BNPL contracts are expected to be designated and regulated as LCCCs under the changes. The legislation would prohibit BNPL providers from restructuring their credit activities to avoid the LCCC regulatory framework. The new framework does not extend to entities that only accept or promote BNPL products.[25]

1.24Under the changes, providers of LCCCs and BNPL products would be required to hold and maintain an Australian Credit License (ACL). They would also be required to comply with the relevant licensing requirements and obligations prescribed by Chapter 2 of the Credit Act. The Australian Securities and Investments Commission (ASIC) retains the power to suspend, cancel and vary an ACL in accordance with Division 6 of Part 2-2 of the Credit Act.[26]

1.25Schedule 2 provides that the National Credit Code would apply to LCCCs and LCCC providers with some minor changes. These are listed below:

requirements relating to interest rates and charges would only apply to LCCC providers that charge interest for the provision of credit;

LCCC providers are allowed to prompt consumers to increase their credit limits, and to increase them with the permission of consumers;

comparison rate requirements outlined in Part 10 of the National Credit Code would not apply to LCCCs; and

default notice requirements are expanded beyond direct debit to cover BNPL payment types, including creditor-initiated charges on a credit card and via the New Payment Platform’s PayTo service.[27]

1.26Section 69E of the draft regulations released by the Department of the Treasury (Treasury) would implement a cap on ongoing and late fees charged by BNPL providers under a contract in order to satisfy the definition of an LCCC. To meet the LCCC definition, BNPL providers cannot charge ongoing fees of more than $200 during the first 12 months and $125 in subsequent years (replicating the existing caps under section 6(5) of the Credit Code).[28]

1.27Further, section 69E of the draft regulations outlines that in order for a contract to be an LCCC, the total amount of default fees cannot exceed more than $10 per month.[29] The current voluntary Code of Practice for BNPL firms requires providers to cap their missed payment fees but does not specify at what amount these fees must be capped.[30]

Responsible lending obligations for LCCCs

1.28Schedule 2 would amend the Credit Act to establish a modified responsible lending obligations (Modified RLO) framework for LCCCs. The Modified RLO framework is intended to better reflect the distinct nature of BNPL products as well as the risks posed to consumers. Under the changes, LCCC providers could choose to be subject to the Modified RLO framework or comply with the existing RLO framework.[31]

1.29These Modified RLO frameworks would require each LCCC provider to draft and review a written policy on how they will comply with the obligation to assess whether an LCCC would be unsuitable for consumers.[32] LCCC products would be subject to principles-based obligations to make reasonable inquiries into, and verify, the financial circumstances of the borrower in making this assessment. Under the Modified RLO framework, a provider’s compliance with these requirements would be determined with regard to specified risk factors.[33]

1.30Schedule 2 does not create new penalty provisions. However, LCCC providers would be subject to existing civil and criminal penalties for breaches of the Credit Act.[34] Further, under the Credit Act, all credit licensees have a general obligation to have internal and external dispute resolution, hardship provisions, and fee caps. ASIC retains the power to suspend, cancel and vary an LCCC provider’s ACL in accordance with Division 6 of Part 2-2 of the Credit Act.[35]

1.31Schedule 2 would provide that LCCCs with a credit limit of $2000 or less will be presumed to meet the consumer’s requirements and objectives.[36] This presumption operates only in relation to the consumer’s requirements and objectives and does not apply to the consumer’s ability to comply with their financial obligations under the LCCC. The presumption would be rebuttable by evidence to the contrary.[37]

Schedule 3 – Medicare levy exemption for lump sum payments

1.32Schedule 3 would amend the Medicare Levy Act to ensure that low-income taxpayers in receipt of an eligible lump-sum payment are not denied concessional treatment under the Medicare Levy Act. The amendment would restore eligible recipients of these payments back to the financial position they would have been in if they had been paid correctly at first instance.[38]

1.33The Senate Economics References Committee’s inquiry into unlawful underpayment of employees’ remuneration highlighted that the receipt of a lump sum payment in arrears unfairly increases their liability under the Medicare levy. This is because the lump sum payment can artificially raise an individual’s income and exceed the low-income threshold used to assess a tax liability under the Medicare Levy Act.[39]

1.34Currently, there are two tax offsets for lump sum payments which can reduce tax liability for income tax and the Medicare levy surcharge. However, neither of these concessions reduce the ordinary amount of Medicare levy payable in circumstances where a recipient receives a lump sum payment in arrears accrued in the previous year that increases an individual’s current Medicare levy liability as a result of the Medicare levy threshold being exceeded.[40]

1.35Schedule 3 would address this by amending the Medicare Levy Act so that a taxpayer’s liability is calculated as if the eligible lump sum payment in arrears had not been paid in the current income year where correct payment arrangements would have resulted in no or a reduced tax liability arising under the Medicare Levy Act.

1.36The amendment would provide that a taxpayer receiving such a payment in arrears is eligible for this exemption if several criteria are met. The eligibility criteria are listed below:

the income for the year of an individual seeking to qualify the exemption must include one or more eligible lump sum payments in arrears;

the amount of the total arrears amount must be ten per cent or more of the individual’s normal taxable income after the deduction of the total arrears amount; and

the taxable income of the individual seeking to qualify for the exemption must be below the relevant Medicare levy threshold for which no levy is payable or the Medicare levy phase in rate applies, or the individual was a prescribed person for at least one day.[41]

Schedule 4 – Multinational tax transparency, country by country reporting

1.37Schedule 4 would amend the TA Act to require select large multinational enterprises to publish selected tax information on a CbC basis for specified jurisdictions, and on either a CbC or an aggregated basis for the rest of the world. These changes would implement part of the government’s multinational tax integrity election commitment package, announced in the October 2022–23 Budget.[42]

1.38The amendments would require certain large multinationals to publicly disclose selected tax information based on the Global Reporting Initiative’s Sustainability Reporting Standards GRI 207: Tax (2019) (GRI 207) and other international reporting standards.[43] Under the changes, entities will be required to disclose information relating to their presence and tax dealings in particular jurisdictions. This information would include:

the name of the jurisdiction;

a description of main business activities;

the number of employees;

revenue from unrelated parties;

revenue from related parties that are not tax residents of the jurisdiction;

profit or loss before income tax;

book value at the end of the reporting period of tangible assets, other than cash and cash equivalents;

income tax paid (on a cash basis);

income tax accrued (current year); and

the difference between income tax accrued and the income tax due if the tax rate were applied to profit and loss before income tax, among other select information; and

the currency used in calculating and presenting the above information.[44]

1.39The reporting obligation would apply to certain types of constitutional corporations, partnerships, or trusts, and entities that are members of a CbC reporting group. CbC reporting parents are not required to publish selected tax information if their aggregated turnover for the income year includes less than a total of $10 million of Australian-sourced income. The $10 million threshold is consistent with comparative international reporting regimes and aligns with the small business entity threshold in the ITA Act.[45]

1.40The amendments would provide the Commissioner of Taxation (the Commissioner) with the power to exempt certain entities in exceptional circumstances where disclosure of information would be inappropriate.[46] The Commissioner may issue exemptions preventing the disclosure of an identified kind of tax information for a single reporting period. This reflects the expectation that exemption powers would be exercised in limited circumstances. It is expected that entities will disclose when an exemption has been granted.[47]

1.41In exercising their exemption powers, the Commissioner is expected to have regard to enhancing tax transparency. When considering whether to exercise these powers, the Commissioner may have regard to whether disclosure of information would:

impact national security;

breach Australian law (disregarding the requirements imposed by these amendments) or breach the laws of another jurisdiction; and

result in substantial ramifications for an entity (by an objective standard) by revealing commercially sensitive information.[48]

1.42In addition to Australia and other specified jurisdictions determined by the Minister, the CbC reporting parent can choose to publish the information above for all jurisdictions that the CbC reporting group operates in. In this case, the CbC reporting parent would not need to publish the same information on an aggregated basis.[49]

1.43Specified jurisdictions would be determined by the Minister via legislative instrument. These jurisdictions are expected to be informed by the Commissioner’s International Dealings Schedule specified countries or jurisdictions list and taxpayer behavioural trends. According to the Explanatory Memorandum, this list is intended to complement the list for European Union’s reporting regime (EU Directive 2021/2101). The legislative instrument providing the list of specified jurisdictions would be subject to the disallowance of the Senate and sunsetting.[50]

1.44The CbC reporting parent would be required to publish disclosed tax information on an Australian Government website, with the Commissioner facilitating publication. The Commissioner cannot amend or modify this information before it is published. Under the changes, disclosed information would be reported in a standardised format and centrally hosted to facilitate comparability across different entities, jurisdictions, and reporting periods. Overtime this will build up a valuable database for the public to access. Further, the amendments would allow the Australian Government to make regulations requiring the publication of additional tax information.[51]

1.45Australian resident entities would be subject to penalties under the TA Act if they refuse or fail to comply with their reporting obligations. The amendments provide that an entity will be penalised 500 penalty units for each period of 28 days. This period would commence on the day when the information is required to be published and conclude when the information is provided to the Commissioner.[52]

Schedule 5 – Deductible gift recipients

1.46Schedule 5 would amend the ITA Act 1997 to list the following organisations as eligible deductible gift recipients:

Australian Democracy Network;

Australian Science Media Centre Incorporated;

Centre for Australian Progress Ltd;

Combatting Antisemitism Fund Limited;

Ethnic Business Awards Foundation Limited;

International Campaign to Abolish Nuclear Weapons, Australia Inc.;

Ourschool Ltd;

Susan McKinnon Charitable Foundation Ltd;

Tasmanian Leaders Inc.; and

The Hillview Foundation Australia Limited.[53]

1.47Under the changes, taxpayers may claim an income tax deduction for gifts made to any of the organisations listed above provided the gift complies with the existing requirements of the income tax law.[54]

Schedule 6 – National skills and workforce development payments

1.48Schedule 6 would amend the Federal Financial Relations Act 2009 (FFR Act) to facilitate Commonwealth payments to state governments in accordance with the National Skills Agreement (NSA) and any successor agreements.[55]

1.49The NSA is five-year agreement with the states relating to payments concerning expenditure on skills and workforce development. The NSA involves funding which is subject to the Intergovernmental Agreement on Federal Financial Relations. The NSA also contains provisions imposing obligations on states concerning their use of funding under this agreement. Schedule 6 would amend the FFR Act to ensure that financial assistance provided under the NSA is spent in accordance with, and subject to, the terms and conditions of the NSA.[56]

1.50Payments to the states under the NSA are currently being made as National Specific Purpose Payments (NSPP) which provide lump sum funding that is indexed and distributed amongst the states. Payments to the states under the NSA for skills and workforce development cannot be appropriately provided for under the NSPP due to the distinct character of support payments required under the NSA.[57]

1.51Schedule 6 would repeal the NSPP for skills and workforce development and introduce new funding arrangements to support payments from the Commonwealth to the states for skills and workforce development which reflect the character of the NSA. Under the arrangements, Commonwealth financial assistance is provided to the states on the condition that it is spent in accordance with the NSA or a successor agreement. This assistance would be subject to the terms and conditions of these agreements.[58]

1.52The amendments would also allow the Minister to determine an amount to be paid to a state for a financial year for the purpose of making a grant to that state under the NSA. Such a determination by the Minister would be made in the form of a legislative instrument. This legislative instrument would be exempt from the disallowance of the Senate.[59]

Schedule 7 – $20 000 instant asset write-off for small business entities

1.53Schedule 7 would amend the IT(TP) Act to extend the $20 000 instant asset write-off for small businesses by 12 months until 30 June 2025. This measure was originally announced in the 2023–24 Budget and was due to expire on 30 June 2024. In the 2024–25 Budget the Government announced that the measure would be extended until 30 June 2025.[60]

1.54The $20 000 instant asset write-off allows small businesses to immediately deduct the full taxable purpose proportion of the cost of eligible depreciating assets costing less than $20 000 that are used or ready to be used for a taxable purpose on or before 30 June 2025. Under the bill, ‘taxable purpose proportion’ is the proportion of an asset’s use in an income year that is for the purposes of producing assessable income.[61]

1.55The $20 000 instant asset write-off applies to the cost of eligible depreciating assets, eligible amounts included in the second element of the cost of a depreciating asset (for example, an amount spent on improving or transporting a depreciating asset), and general small business pools, until 30 June 2025.[62]

1.56A small business entity can immediately deduct an amount included in the second element of a depreciating asset’s cost provided the amount is:

less than the threshold;

the first such amount to be deducted in respect of the asset; and

the asset was fully deducted in a previous income year.

1.57A small business entity can also the deduct the balance of its general small business pool at the end of the income year if the balance of the pool at the end of the year is less than a threshold amount.[63]

1.58The amendments provide that the $20 000 instant asset write-off is available to small business entities with an aggregated annual turnover of less than $10 million. Under the ITA Act 1997, an entity is a small business entity for an income year if the entity carries on a business in that year and:

the entity carried on a business in the prior income year and its aggregated turnover was less than a threshold amount; or

the aggregated turnover of the entity in the current income year is likely to be less than that threshold.[64]

Consultation

1.59On 12 July 2022, the Australian Government announced that it would be considering reforms to the regulation of BNPL products. Following this announcement, the Treasury held targeted bilateral meetings with 28 stakeholders to inform public consultations (including roundtables) on an options paper titled ‘Regulating Buy Now, Pay Later in Australia’.[65] This consultation was undertaken from 21 November 2022 to 23 December 2022. Treasury received 78 written submissions, including 16 confidential submissions. Further roundtables and bilateral meetings were held in early 2023 prior to the announcement of the changes by the Minister on 22 May 2023 in an address to the Responsible Lending and Borrowing Summit.[66]

1.60Treasury held consultations on exposure draft legislation for the Medicare levy exemption for lump sum payments measure in Schedule 3. This consultation ran from 5 April 2024 to 23 April 2024. As of 30 July 2024, Treasury has not published submissions received as part of this consultation.[67]

1.61Treasury also held consultations on the multinational tax transparency, CbC reporting regime reforms in Schedule 4. This consultation ran from 12 February 2024 to 5 March 2024. Treasury received 39 written submissions, including four confidential submissions.[68]

Commencement

1.62The bill provides the following commencement dates:

Source: Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024.

Financial Impact

1.63The provisions of the bill are projected to have financial impacts as outlined in the table below.

Source: Explanatory Memorandum, pp. 2–8.

Legislative Scrutiny

1.64In its Scrutiny Digest 7 of 2024, the Senate Standing Committee for the Scrutiny of Bills (the Scrutiny Committee) raised concerns with provisions of the bill outlined in Schedules 2, 4 and 6.[69]

Schedule 2 – Buy now, pay later

1.65The Scrutiny Committee expressed concerns with item 14 of Schedule 2 to the bill. This provision seeks to insert a new Part 3-2BA into the Credit Act which would place an obligation on licensees to make reasonable inquiries about a consumer’s requirements, objectives and financial situation when entering into a LCCC or increasing the debt limit of an LCCC. This information may include whether the consumer is financially vulnerable, and any additional matters as prescribed by the regulations.[70]

1.66The Scrutiny Committee stated that where a bill provides for the collection, use or disclosure of personal information, the explanatory material should address why this is appropriate and prescribe appropriate safeguards to protect individual privacy. The Scrutiny Committee stated that it is unclear whether the Privacy Act 1988 and Australian Privacy Principles would apply to LCCCs, despite the stated intention in the explanatory material.[71]

1.67The Scrutiny Committee noted that licensees can elect for provisions in Part 3-2BA to apply to them. However, the Scrutiny Committee stated that the Explanatory Memorandum should address this issue and requested the Treasurer’s advice as to what safeguards are in place to protect personal financial information, including whether the Privacy Act 1988 applies to all licensees entering into LCCCs.[72]

Schedule 4 – Multinational tax transparency, country by country reporting

1.68The Scrutiny Committee expressed concerns with item 4 of Schedule 4 which would insert a new section 3DA into the TA Act. The provision would provide for the kinds of information that are required to be published by certain CbC reporting entities. Subsection 3DA(7) would require that certain documents must be considered to determine the effect of other provisions in section 3DA, including a document, or part of a document, to be prescribed by the regulations.[73]

1.69The Scrutiny Committee reiterated its view that where material is incorporated by reference into law, it should be freely and readily available to all those who may be interested in the law. The Scrutiny Committee stated that it is unclear whether any and all documents prescribed by subsection 3DA(7) will be freely or publicly available, but noted that it is not uncommon for documents prescribed under these provisions to be made available to the public.[74]

1.70The Scrutiny Committee requested the Treasurer’s advice as to whether documents which would be incorporated by reference under section 3DA of the TAA will be made freely available to all persons interested in the law.[75] The Minister’s response was provided on 16 July 2024.[76]

Schedule 6 – National skills and workforce development payments

1.71The Scrutiny Committee expressed concerns with items 4 and 7 of Schedule 6.

1.72Item 4 would repeal section 12 of theFFR Act which provides for lump sum national skill and workforce development payments to be made to the states as indexed each financial year. This would be replaced by a flexible funding model with financial assistance to the states payable in accordance with the current skills and workforce development agreement.[77] Subsection 12A(2) would provide that the Minister may determine an amount to be paid to a state in accordance with the agreement. Subsection 12A(3) exempts this determination from disallowance by the Senate.[78]

1.73The Scrutiny Committee acknowledged that the Senate’s disallowance power is the primary means by which Parliament exercises control over legislative power it has delegated to the executive and that any exemption from disallowance will be subject to rigorous scrutiny.[79] The Scrutiny Committee did not accept the rationale for the exemption as outlined in the Explanatory Memorandum. The Scrutiny Committee stated that a legislative instrument which arises out of an intergovernmental agreement or scheme is not automatically entitled to an exemption from disallowance.[80]

1.74Subsections 12A(4)(5) would provide that any amounts paid to the states are made on the condition that it be spent in accordance with the terms and conditions of the agreement.[81] Item 7 of Schedule 6 would amend section 22 of the FRR Act to provide that national sills and workforce development payments to the states are to be made out of the Consolidated Revenue Fund.[82]

1.75The Scrutiny Committee expressed concerns that these provisions would reduce parliamentary oversight and scrutiny by moving the amounts payable to the states from the terms and conditions of the FFR Act to the terms and conditions of the skills and workforce development agreement.[83] The Scrutiny Committee noted that section 96 of the Constitution provides the Australian Government with the power to make grants to the states on terms and conditions which the Commonwealth deems necessary. However, the Scrutiny Committee considered that the exercise of this power should be subject to effective parliamentary scrutiny.[84]

1.76Further, the Scrutiny Committee observed that once enacted, standing appropriations allow entities to withdraw expenditure from the Consolidated Revenue Fund on an ongoing basis, usually for indefinite amounts and duration, without ongoing parliamentary oversight. This is distinct from annual appropriations, which permit expenditure for a particular purpose subject to annual parliamentary approval.[85]

1.77The Scrutiny Committee expressed concerns that standing appropriations do not provide parliament with a mechanism to assess whether ongoing expenditure remains appropriate and to act accordingly. The Scrutiny Committee noted that the Explanatory Memorandum provided no justification for the amendment to the standing appropriation.[86]

1.78The Scrutiny Committee concluded by requesting the Treasurer’s detailed advice on the following matters:

whether subsection 12A(3) could be removed to subject the determinations of the Minister to the disallowance of the Senate;

whether the legislation could place a limitation on the amount of funds that may be appropriated under the legislation or the duration of the expenditure;

whether the standing appropriation is subject to a sunset clause and, if not, whether it would be appropriate for such a clause to be included in the legislation; and

what mechanisms exist to report to the parliament on any expenditure authorised by the standing appropriation.[87]

1.79The Minister’s response was provided on 16 July 2024.[88]

Human rights implications

1.80The Statement of Compatibility with Human Rights (the Statement) provides that 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.[89]

1.81According to the statement, Schedules 2 and 6 engage the following human rights and freedoms:

the right to a fair trial and fair hearing rights;

the right to protection from arbitrary or unlawful interference with privacy;

the right to education; and

the right to work.[90]

1.82According to the statement, Schedules 3, 4, 5 and 7 do not engage any of the applicable human rights and freedoms under section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.[91]

Schedule 2 – Buy now, pay later

1.83According to the statement, Schedule 2 is compatible with human rights as, to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.[92]

Right to a fair trial and fair hearing rights

1.84Schedule 2 engages the right to a fair trial and other fair hearing rights outlined in Articles 14 and 15 of the International Covenant on Civil and Political Rights (ICCPR). Schedule 2 engages these rights by extending certain civil penalty and criminal penalty provisions in the Credit Act and the National Credit Code to LCCCs. None of these civil penalty provisions carry a penalty of imprisonment and the maximum civil penalty amounts are consistent with penalties for other provisions in the Credit Act and the National Credit Code. The judiciary will continue to have discretion to consider the seriousness of any breach and impose an appropriate penalty.[93]

1.85Schedule 2 also engages these rights by extending the application of anti-avoidance provisions to LCCCs, subjecting relevant conduct to the presumption that a person entered into or carried out a scheme for an avoidance purpose if prescribed by ASIC under the legislation. The Explanatory Memorandum states that allocating the legal burden of proof in this way is appropriate as it is easier for the individual to disprove the presumption than it is for ASIC to prove otherwise. Further, the Explanatory Memorandum provides that this presumption only applies in civil proceedings.[94]

Right to protection from arbitrary or unlawful interference with privacy

1.86Schedule 2 may engage the right to privacy as outlined by Article 17 of the ICCPR by authorising the collection, use, and disclosure of the personal information of customers who enter into LCCCs by LCCC providers. These provisions require an LCCC provider to assess the unsuitability of a customer to enter into an LCCC which would involve the LCCC making reasonable inquiries about the consumer.[95]

1.87However, the provisions provide that any personal information collected as part of these assessments may only be collected and used for the particular purpose of facilitating assessments of suitability to enter into LCCCs. The Explanatory Memorandum also makes clear that the existing privacy safeguards as provided by the Privacy Act 1988 continue to apply.[96]

Schedule 6 – National skills and workforce development payments

1.88According to the statement, Schedule 6 is compatible with human rights as it promotes the right to education and the right to work by supporting funding to the states and territories to deliver programs, services and reforms with respect to skills and workforce development.[97]

Right to education

1.89Schedule 6 engages the right to education as outlined in Article 13 of the International Covenant on Economic, Social and Cultural Rights (ICESCR), Articles 28 and 29 of the Convention on the Rights of the Child (CRC) and Article 24 of the Convention on the Rights of Persons with Disabilities (CRPD). Schedule 6 promotes the right to education by providing skills and vocational education funding to the states and territories in accordance with the National Skills Agreement.[98]

Right to work

1.90Schedule 6 engages the right to work as outlined in Article 6 of the ICESCR and Article 27 of the CRPD. The right to work provides that all people have the opportunity to gain their living by work which they choose freely. Schedule 6 supports this right by providing funding to the states and territories for skills and workforce development under the National Skills Agreement. As per the terms of this agreement, this funding will be used to better improve and support Australians in obtaining enhanced skills and capabilities, increasing their employability and opportunity for work.[99]

Regulatory Impact Statements

1.91An impact analysis of Schedule 2 is attached to the Explanatory Memorandum. The Explanatory Memorandum provides that Schedule 7 is expected to have a minimal regulatory impact.[100] The Explanatory Memorandum does not refer to regulatory impact statements for any of the schedules to the bill.[101]

Conduct of the inquiry

1.92The committee advertised the inquiry on its website and wrote to interested individuals and organisations seeking written submissions by 28 June 2024.

1.93The committee received 28 submissions and one supplementary submission for this inquiry, as well as additional information and answers to questions on notice, which are listed at Appendix 1.

1.94The committee held one public hearing for the inquiry at Parliament House, Canberra, on 24 July 2024. The names of witnesses and organisations who appeared at the hearing are listed at Appendix 2.

Acknowledgements

1.95The committee thanks all individuals and organisations who assisted with the inquiry, especially those who made written submissions and participated in the public hearing.

Footnotes

[1]House of Representatives Votes and Proceedings, No. 125, 5 June 2024, pp. 1607–1608.

[2]Journals of the Senate, No. 111, 16 May 2024, pp. 3381–3383.

[3]Journals of the Senate, No. 112, 24 June 2024, p. 3441.

[4]Journals of the Senate, No. 115, 27 June 2024, pp. 3533–3534.

[5]The committee is continuing a separate inquiry into the Treasury Laws Amendment (Build to Rent) Bill 2024, and is currently scheduled to report on that bill by 4 September 2024.

[6]Explanatory Memorandum, p. 47.

[7]The Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, House of Representatives Hansard, 5 June 2024, p. 10.

[8]The Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, House of Representatives Hansard, 5 June 2024, p. 10.

[9]The Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, House of Representatives Hansard, 5 June 2024, pp. 10–11.

[10]The Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, House of Representatives Hansard, 5 June 2024, p. 11.

[11]Explanatory Memorandum, p. 3.

[12]The Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, House of Representatives Hansard, 5 June 2024, p. 11.

[13]Explanatory Memorandum, p. 4.

[14]The Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, House of Representatives Hansard, 5 June 2024, p. 11.

[15]The Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, House of Representatives Hansard, 5 June 2024, p. 11.

[16]Explanatory Memorandum, pp. 5–6.

[17]The Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, House of Representatives Hansard, 5 June 2024, p. 12.

[18]Explanatory Memorandum, p. 7.

[19]The Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, House of Representatives Hansard, 5 June 2024, p. 12.

[20]Explanatory Memorandum, p. 8.

[21]The Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, House of Representatives Hansard, 5 June 2024, p. 12.

[22]Explanatory Memorandum, p. 47.

[23]Explanatory Memorandum, p. 50.

[24]Explanatory Memorandum, p. 50.

[25]Explanatory Memorandum, p. 50.

[26]Explanatory Memorandum, pp. 50–51.

[27]Explanatory Memorandum, p. 52.

[28]See, Explanatory Memorandum, p. 52; National Consumer Credit Protection Amendment (Low Cost Credit) Regulations 2024, Exposure Draft, section 69E.

[29]National Consumer Credit Protection Amendment (Low Cost Credit) Regulations 2024, Exposure Draft, section 69E.

[30]Explanatory Memorandum, p. 178.

[31]Explanatory Memorandum, p. 51.

[32]Explanatory Memorandum, pp. 51–52.

[33]Explanatory Memorandum, pp. 51–52.

[34]Explanatory Memorandum, p. 52.

[35]Explanatory Memorandum, p. 52.

[36]Explanatory Memorandum, pp. 62–63.

[37]Explanatory Memorandum, p. 62.

[38]Explanatory Memorandum, p. 77.

[39]Explanatory Memorandum, p. 78.

[40]Explanatory Memorandum, pp. 78–79.

[41]Explanatory Memorandum, pp. 79–81.

[42]Explanatory Memorandum, pp. 83–84.

[43]Explanatory Memorandum, p. 84.

[44]Explanatory Memorandum, p. 89.

[45]Explanatory Memorandum, pp. 85–86.

[46]Explanatory Memorandum, pp. 87–88.

[47]Explanatory Memorandum, pp. 87–88.

[48]Explanatory Memorandum, pp. 87–88.

[49]Explanatory Memorandum, pp. 89–90.

[50]Explanatory Memorandum, p. 90.

[51]Explanatory Memorandum, pp. 84–85.

[52]Explanatory Memorandum, pp. 94–95.

[53]Explanatory Memorandum, p. 97.

[54]Explanatory Memorandum, p. 99.

[55]Explanatory Memorandum, p. 103.

[56]Explanatory Memorandum, pp. 104–105.

[57]Explanatory Memorandum, pp. 104–105.

[58]Explanatory Memorandum, pp. 104–105.

[59]Explanatory Memorandum, p. 106.

[60]Explanatory Memorandum, pp. 109–110.

[61]Explanatory Memorandum, pp. 110–111.

[62]Explanatory Memorandum, p. 111.

[63]Explanatory Memorandum, pp. 112–113.

[64]Explanatory Memorandum, p. 110.

[65]Explanatory Memorandum, p. 3.

[66]See, for example, Explanatory Memorandum, p. 126; Department of the Treasury, Regulating Buy Now, Pay Later in Australia, n.d., Regulating Buy Now, Pay Later in Australia | Treasury.gov.au (accessed 8 July 2024).

[67]Department of the Treasury, Exempting lump sums payments in arrears from the Medicare levy, n.d., Exempting lump sums payments in arrears from the Medicare levy | Treasury.gov.au(accessed 8 July 2024).

[68]Department of the Treasury, Public country-by-country reporting – February 2024, n.d., Public country-by-country reporting – February 2024 | Treasury.gov.au (accessed 8 July 2024).

[69]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, pp. 52, 54, 55.

[70]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, pp. 52–53.

[71]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, p. 53.

[72]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, pp. 53–54.

[73]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, p. 54.

[74]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, pp. 54–55.

[75]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, p. 55.

[76]Senate Standing Committee for the Scrutiny of Bills, Ministerial Responses, 23 July 2024, Ministerial Responses – Parliament of Australia (aph.gov.au) (accessed 30 July 2024).

[77]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, p. 55.

[78]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, p. 55.

[79]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, p. 56.

[80]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, p. 57.

[81]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, pp. 55–56.

[82]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, p. 56.

[83]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, p. 56.

[84]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, p. 56.

[85]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, p. 57.

[86]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, pp. 57–58.

[87]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 7 of 2024, June 2024, p. 58.

[88]Senate Standing Committee for the Scrutiny of Bills, Ministerial Responses, 23 July 2024, Ministerial Responses – Parliament of Australia (aph.gov.au) (accessed 30 July 2024).

[89]Explanatory Memorandum, p. 119.

[90]Explanatory Memorandum, p. 120.

[91]Explanatory Memorandum, pp. 123–125, 126–127.

[92]Explanatory Memorandum, p. 123.

[93]Explanatory Memorandum, pp. 120–121.

[94]Explanatory Memorandum, pp. 121–122.

[95]Explanatory Memorandum, p. 122.

[96]Explanatory Memorandum, pp. 122–123.

[97]Explanatory Memorandum, p. 126.

[98]Explanatory Memorandum, p. 126.

[99]Explanatory Memorandum, p. 126.

[100]Explanatory Memorandum, p. 9.

[101]Explanatory Memorandum, p. 167.