2.1
This chapter provides context for the amendments contained in the Treasury Laws Amendment (2021 Measures No. 5) Bill 2021 (the bill), as well as an overview of the key measures enacted by each of its schedules. Consideration of the bill by the Senate Standing Committee for the Scrutiny of Bills is also examined, along with the bill's compatibility with human rights and its financial impact.
Context of the amendments
Australian Screen Production Incentive Reforms
2.2
The Australian screen production industry employs approximately 25 000 full‑time equivalent staff and contributes $3 billion in value-add to the economy each year. Australian screen content is also seen as culturally beneficial to the nation.
2.3
Without significant funding assistance and government regulation, Australia would be unable to produce the range and type of content that delivers cultural benefits—particularly given the small size of the Australian market and the volume of content produced by larger English‑language markets such as the United States and the United Kingdom.
2.4
The demand for quality screen content has surged in response to the growth of online streaming services. This has, in turn, increased competition for financing. In addition, content producers—including broadcasters, online services and film studios—are also 'competing for fracturing audience share and revenue'. More recently, the COVID-19 pandemic has added to these commercial pressures by reducing advertising expenditure and interrupting the production of new content.
2.5
The Australian Government's (the government's) primary mechanism for supporting the screen industry is the Australian Screen Production Incentive (ASPI). The ASPI provides tax incentives for film, television, and other screen production in Australia via three streams:
Producer Offset – a 40 per cent rebate on qualifying Australian production expenditure on eligible feature films and 20 per cent on other formats (TV, online, DVD), for productions with significant Australian content;
Location Offset – a 16.5 per cent rebate on qualifying Australian production expenditure for eligible productions with a minimum Australian spend of $15 million; and
Post, Digital and Visual Effects (PDV) Offset – a 30 per cent rebate on qualifying expenditure for productions undertaking PDV production in Australia (with an eligibility threshold of $500 000 expenditure).
2.6
Since its introduction in 2007, until 30 June 2020, the ASPI has provided over $2.9 billion to the Australian screen industry.
2.7
While recognising that the current policy settings for the ASPI were appropriate when the scheme was designed, a number of reviews undertaken since 2017 have also found that its settings need modernising in order to support the creation of quality Australian content across all platforms.
2.8
One of these reviews, the Australian Competition and Consumer Commission's Digital Platforms Inquiry, recommended the development of a 'platform-neutral regulatory framework' to ensure 'effective and consistent regulatory oversight of all entities involved in content production or delivery in Australia, including media businesses, publishers, broadcasters and digital platforms'.
2.9
As part of the government's response to the Digital Platforms Inquiry, the Australian Communications and Media Authority and Screen Australia prepared an options paper that examined how best to support Australian stories on screen in the current environment. The paper subsequently underpinned stakeholder consultations on ways to support the Australian screen industry into the future. By the end of the consultation phase, over 300 submissions had been received with most stakeholders supporting changes to screen production incentives that would allow them to be globally competitive and to create quality content across a range of platforms.
Corporate insolvency reforms
2.10
The government's corporate insolvency reforms commenced in January 2021. These reforms established a new debt restructuring process and a simplified liquidation process for eligible incorporated small businesses. The aim of the reforms is to allow small businesses to either restructure their debts quickly and keep trading or, where that is not possible, help them to wind up faster and more cheaply to improve returns for creditors and employees.
2.11
Schedule 2 would make consequential amendments to integrate these reforms across a number of Commonwealth acts.
Other amendments
2.12
The process of making periodical minor and technical amendments to Treasury legislation was first supported by a 2008 Tax Design Review Panel recommendation and has since been expanded to all legislation in the Treasury portfolio.
2.13
Schedule 3 would make miscellaneous and technical amendments to a variety of laws within the Treasury portfolio. These amendments would:
…correct typographical and numbering errors, repeal inoperative provisions, remove administrative inefficiencies, address unintended outcomes, and ensure that the law gives effect to the original policy intent.
Overview of the bill
Schedule 1 – Australian Screen Production Incentive Reforms
2.14
Schedule 1 of the bill would amend the Income Tax Assessment Act 1997 (the ITA Act) to increase the Producer Offset for films that are not feature films released in cinemas. It would also make threshold, eligibility and integrity amendments across the Producer, Location and PDV Offsets.
Producer Offset rate
2.15
Currently, the Producer Offset provides a refundable tax offset of:
40 per cent of the qualifying Australian production expenditure (QAPE) incurred in the making of an eligible feature film; and
20 per cent of the QAPE incurred for other eligible formats such as television series, documentaries, animation series and online content.
2.16
The proposed amendments would increase the Producer Offset to 30 per cent for all types of eligible films that are not feature films, including single episode television shows, a television series, documentary, or other film production not released in cinemas.
2.17
Eligibility for the 40 per cent Producer Offset would require that the film be commercially distributed in Australian cinemas. The commercial release would also be expected to be the film's primary release in Australia, with the intention that 'a meaningful proportion' of the project's revenue would be earned through the Australian box office.
Threshold amendments
Minimum qualifying thresholds for the Producer and PDV Offsets
2.18
The current minimum QAPE threshold for claiming the Producer Offset in relation to a feature film is $500 000. The proposed amendments increase this threshold to $1 million for all feature length content. The QAPE threshold for non-feature length content would remain unchanged.
2.19
The amendments would also increase the minimum QAPE threshold for claiming the PDV Offset from $500 000 to $1 million.
Eligibility and integrity amendments
Commercial hour cap for a drama series and seasons of a drama series
2.20
Currently, a television drama series, or season of a drama series, is considered complete for the purposes of calculating the Producer Offset when it is either:
ready to distribute or screen; or
when the episode containing the 65th commercial hour is in that state.
2.21
As a result, production expenditure past the 65th commercial hour cannot be included as QAPE in calculating the Producer Offset.
2.22
The proposed amendments would remove this 65 commercial hour cap to encourage increased investment in longer drama series. As a consequence of this change, an existing requirement to demonstrate new creative content in order to reset the 65 hour cap would also be removed.
General business overheads
2.23
The proposed amendments would remove a company's ability to include general business overheads (that are not incurred in relation to making a film) as QAPE for the purposes of the Producer, Location and PDV Offsets. This amendment aims to ensure that the offsets more directly support core production expenditure.
Copyright expenditure
2.24
Currently, all expenditure incurred in acquiring or licensing Australian copyright can be counted as QAPE for the purposes of calculating an income tax offset.
2.25
The proposed amendments would cap the amount of copyright expenditure that can be counted toward QAPE at 30 per cent of the total production expenditure on the film. For the Producer Offset, this cap would not cover expenditure on acquisition materials such as story rights, which would be capped under 'development expenditure'.
Expenditure incurred overseas
2.26
To encourage expenditure within Australia, the proposed amendments would remove a company's ability to include expenditure incurred overseas as QAPE for the purposes of calculating an income tax offset. This would apply regardless of whether the goods and services were provided by Australian residents or not.
Development expenditure
2.27
Currently, development expenditure on a film and remuneration for writers, directors, producers and principal cast members can be counted as QAPE up to an amount equal to 20 per cent of the total production expenditure on the film. However, this limit does not apply if the film is a documentary.
2.28
The proposed amendments would align the treatment of development expenditure across all films for the purposes of the Producer Offset by also applying the 20 per cent limit to documentaries.
Re-versioning
2.29
Currently, a company can count expenditure on an unlimited number of re-versions as QAPE for the purposes of the Producer Offset (as long as the expenditure is incurred during the income year in which the film is completed).
2.30
The proposed amendments would limit a company's ability to claim expenditure on re-versions of a film as QAPE to the first version of a film and one re-version.
Application and transitional provisions
2.31
The bill would provide for the retrospective application of the amendments affecting the Producer and PDV Offsets, which would apply to films that commence principal photography, or PDV activity on or after 1 July 2021.
Schedule 2 – Consequential and transitional matters arising from corporate insolvency reforms
2.32
Schedule 2 of the bill would make consequential amendments to integrate corporate insolvency reforms across multiple Commonwealth acts in order to:
clarify eligibility to access the debt restructuring and simplified liquidation processes;
update Commonwealth legislation to add restructuring as a type of external administration;
make updates concerning the role of the restructuring practitioner;
integrate debt restructuring and simplified liquidation into the special administration process for Aboriginal and Torres Strait Islander corporations;
make clarifications concerning simplified liquidation; and
make other minor and technical amendments.
Clarifying eligibility to access the debt restructuring and simplified liquidation processes
2.33
The corporate insolvency reforms target small businesses with non-complex liabilities by specifying that eligible companies must have total liabilities not exceeding $1 million on the day they enter debt restructuring or simplified liquidation.
2.34
The proposed amendments would further clarify the intent of the reforms by preventing entities subject to prudential regulation by the Australian Prudential Regulation Authority—such as banks—from accessing these processes.
Updating Commonwealth legislation to add restructuring as a type of external administration
2.35
Under the corporate insolvency reforms, debt restructuring and simplified liquidation were added to the set of processes available for insolvent incorporated small businesses. They also introduced the 'small business restructuring practitioner' as a new type of registered liquidator.
2.36
The bill would make minor and technical amendments to integrate debt restructuring into the Customs Act 1901, Excise Act 1901, Export Control Act 2020, Fair Entitlements Guarantee Act 2012, the ITA Act, and the Superannuation Industry (Supervision) Act 1993.
Updating the Fair Entitlements Guarantee Act 2012
2.37
Where an employee loses their job due to the liquidation or bankruptcy of their employer, the Fair Entitlements Guarantee Act 2012 (the FEG Act) provides financial assistance in relation to unpaid employee entitlements.
2.38
The bill would amend the definition of 'insolvency practitioner' to include a restructuring practitioner for a company. This would:
allow eligible employees to access the FEG scheme where their employer had been under restructuring prior to being wound up; and
provide consistent treatment of employee eligibility for FEG advances where there is a nexus between the loss of employment and external administration commencing.
2.39
However, the bill would specifically carve out the appointment of a restructuring practitioner in relation to determining the wages entitlement period under the FEG Act. This reflects the fact that currently, the calculation of the wages entitlement period is tied to the earlier of either the end of a person's employment or the appointment of an insolvency practitioner. Under the new debt restructuring arrangements, a business may continue to trade after the appointment of a restructuring practitioner, meaning a person's employment could end much later than that appointment.
2.40
The proposed carve out would mean that where a company is under restructuring arrangements prior to being wound up, the wages entitlement period would be tied to the appointment of an insolvency practitioner such as a liquidator or administrator. This would avoid a gap in coverage of the FEG scheme where a person's employment ends after a restructuring practitioner is appointed. It would also ensure consistency with the policy intent of the FEG scheme to 'advance employee entitlements for the last 13 weeks of an employee's employment where the employer was liable for unpaid wages'.
Updates concerning the role of the restructuring practitioner
2.41
The bill would update the Corporations Act 2001 (the Corporations Act) to provide restructuring practitioners—and those dealing with them—with protections that are consistent with those applying to external administrators for a company under voluntary administration. The bill would also make amendments to integrate the role of the restructuring practitioner into the Education Services for Overseas Students Act 2000 and Crimes (Taxation Offences) Act 1980.
Integrating debt restructuring and simplified liquidation into the special administration process for Aboriginal and Torres Strait Islander corporations
2.42
The Corporations (Aboriginal and Torres Strait Islander) Act 2006 (the CATSI Act) provides for special external administration arrangements for corporations registered under that Act. The bill would amend the CATSI Act to:
incorporate the debt restructuring and simplified liquidation arrangements as part of the special administration process;
maintain the priority of the special administration arrangements over the debt restructuring process;
ensure that any restructuring plan in place at the time a special administrator is appointed continues to operate until it is terminated in accordance with the plan, the law, or by an order of the Court;
provide a codified exception to the prohibition that prevents an officer of an Aboriginal and Torres Strait Islander corporation under special administration from exercising their statutory powers without consent from the special administrator; and
allow restructuring practitioners to deal with property in accordance with a restructuring plan.
Clarifications concerning simplified liquidation
2.43
The bill would amend the Corporations Act, the Australian Securities and Investments Commission Act 2001 (the ASIC Act) and the Tax Agent Services Act 2009 (the Tax Agent Services Act) to:
clarify the simplified liquidation eligibility criteria relating to tax lodgements;
clarify that the Australian Securities and Investments Commission may investigate offences identified in a report associated with the simplified liquidation process (and that such a report is exempt from public disclosure); and
enable resolutions to be passed without a meeting of creditors in a simplified liquidation (by way of a proposal to creditors and contributories).
Other minor and technical amendments
2.44
Schedule 2 to the bill would also make a number of minor and technical amendments, such as clarifying when an electronic communication may be taken to have been sent and received and inserting a definition of external administration into the Tax Agent Services Act.
Schedule 3 – Miscellaneous and technical amendments
2.45
Schedule 3 of the Bill would make a number of miscellaneous and technical amendments to various laws in the Treasury portfolio with the intent to improve these laws and ensure they operate as designed. These amendments would:
correct spelling and typographical errors;
fix incorrect legislative references;
address unintended outcomes;
adopt modern drafting practices;
enhance readability and administrative efficiency; and
repeal redundant and inoperative provisions.
2.46
Some of the key changes to specific laws are addressed in further detail below.
Australian Securities and Investments Commission Act 2001
2.47
The bill would amend sections of the ASIC Act relating to consumer protection in order to keep the wording consistent throughout. The bill would also amend two drafting errors that relate to the payment periods applying to civil infringement notices provided by ASIC.
Income Tax Assessment Act 1997
2.48
The bill would clarify the mechanism through which an entity may change its loss carry back choice with the aim of ensuring entities have greater flexibility in utilising tax losses.
2.49
In order to ensure an entity's franking account balance is restored to the amount it would be if it had received the correct tax offset refund in the first place, the bill would also amend the ITA Act to ensure a franking credit arises where:
a franking debit arises because the entity or company receives a tax offset refund;
the entity or company tax offset refund is subsequently reduced and the entity or company is liable to pay the Commonwealth the amount of the excess mentioned in section 172A(2) of the Income Tax Assessment Act 1936; and
the entity or company pays the amount of the excess.
2.50
The bill also makes changes to the ITA Act to provide consistency with the Accounting Standard for Leases (AASB 16), applied in January 2019, which introduced a single accounting model for lessees.
Foreign Acquisitions and Takeovers Act 1975
2.51
Division 3 of Part 7 of the Foreign Acquisitions and Takeovers Act 1975 (the Foreign Acquisitions Act) deals with confidentiality of information and specifies when a person 'does not have to disclose information to a court, tribunal, authority or person having power to require the production of documents or answering of questions'.
2.52
The bill would clarify that this applies to protected information, given the potential harm that may arise from the sharing of such information, particularly if it is commercially sensitive.
2.53
The bill would also amend Section 61 of the Foreign Acquisitions Act (which prescribes the time limit the Treasurer has for making a decision on exemption certificates) to allow the Treasurer to 'extend or further extend the decision period for making decisions on exemption certificates by up to 90 days'.
2.54
This proposed amendment would provide the Treasurer more flexibility when further consideration time is required, for example to allow for consultation 'with Commonwealth, State or Territory bodies, to consider their expert input or develop bespoke conditions'.
A New Tax System (Goods and Services Tax) Act 1999 and A New Tax System (Luxury Car Tax) Act 1999
2.55
The bill would amend the A New Tax System (Goods and Services Tax) Act 1999 to enable medical practitioners to issue medical eligibility certificates that allow those living with certain disabilities to access the GST-free supply of a vehicle. This would update the current process that utilises a 'nominated company' which no longer issues certificates.
2.56
Consequential amendments would then be made to the definition of a disabled person in the A New Tax System (Luxury Car Tax) Act 1999 and the term 'officer' in the A New Tax System (Goods and Services Tax) Act 1999.
Life Insurance Act 1995
2.57
To improve efficiencies and avoid delays in dealing with unclaimed money claims, the bill would amend the Life Insurance Act 1995 to allow the Treasurer to delegate any of their powers and functions relating to reuniting unclaimed money payable in respect of life insurance policies. Specifically, these functions would be able to be delegated to 'either a non-corporate Commonwealth entity for which the Treasurer is the responsible Minister or to a member or staff member of such an entity'.
Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020
2.58
The Modernising Business Registers program transfers various registers from ASIC to the Registrar and is implemented largely by the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020.
2.59
The bill would amend the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 to allow for the transfer of registers to be conducted in a staggered approach, a requirement not anticipated in the original program.
Consideration by the Senate Standing Committee for the Scrutiny of Bills
2.60
The Senate Standing Committee for the Scrutiny of Bills (the Scrutiny Committee) considered the bill in Scrutiny Digest 10 of 2021.
2.61
The Scrutiny Committee raised concerns about the retrospective application of the amendments in Schedule 1, which are proposed to apply from 1 July 2021. In doing so, it referred to its long-standing scrutiny concern that retrospectivity challenges a basic value of the rule of law—namely that, in general, laws should act prospectively. It expressed particular concern about retrospectivity where it could have a detrimental effect on individuals. The Scrutiny Committee outlined its expectation that explanatory materials for proposed legislation with a retrospective effect should explain the reasons for retrospectivity, as well as the potential for adverse impacts on individuals.
2.62
The rationale provided in the Explanatory Memorandum (EM) indicated that the amendments would apply retrospectively as they were not expected to be enacted prior to 1 July 2021. The EM acknowledged that while the increase in the producer offset would be 'wholly beneficial to affected companies', the increase in eligibility thresholds and limitations on what counts as qualifying Australian production expenditure would 'remove or reduce' an existing entitlement. However, the EM stressed that the industry was aware—via public announcements and consultation—of the changes and expected that affected companies would have:
…taken the increased eligibility thresholds and limits on the scope of qualifying Australian production expenditure into account in making decisions … for the 2021–22 income year and later income years.
2.63
While acknowledging the benefits of some aspects of Schedule 1, the Scrutiny Committee did not consider public consultation sufficient to allay its concerns relating to retrospectivity. In light of this, the Scrutiny Committee concluded by drawing its concerns to the attention of senators and leaving to the Senate as a whole 'the appropriateness of applying the amendments in the bill on a retrospective basis'.
2.64
The Scrutiny Committee also raised concerns about proposed subsection 496‑10(2A) of the CATSI Act. The proposed subsection would provide a new defence to an offence committed under existing subsection 496-10(1). However, it would reverse the burden of proof by making the defendant bear the evidential burden in relation to this defence.
2.65
The Scrutiny Committee indicated that provisions that reverse the burden of proof interfere with the common law right to be presumed innocent until proven guilty. The Scrutiny Committee also set out its expectation that the EM provide justification for any such reversal.
2.66
While the Scrutiny Committee noted the EM's statement that the reversal was appropriate as it was limited to reliance on the proposed exemption (and not the proving of innocence), it did not find this to be an adequate justification. In line with advice contained in the Attorney-General's Department's Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers (Guide to Framing Commonwealth Offences), the Scrutiny Committee also questioned whether the proposed defence would be 'peculiarly within the knowledge of the defendant or a matter that it would be significantly more difficult and costly for the prosecution to disprove'.
2.67
In light of its concerns, the Scrutiny Committee requested the Assistant Treasurer's detailed justification of the appropriateness of including the matter in proposed subsection 496-10(2A) as an offence-specific defence. It also suggested the justification explicitly address the relevant principles in the Guide to Framing Commonwealth Offences.
2.68
The Assistant Treasurer advised that the proposed offence-specific defence, which would reverse the evidential burden of proof, was appropriate as it would ensure that:
arrangements already made through a restructuring plan are preserved to give creditors certainty that their rights under the plan are not affected by the commencement of a special administration; and
a restructuring practitioner can continue to exercise their functions and powers in relation to a restructuring plan while an Aboriginal and Torres Strait Islander corporation is under special administration.
2.69
The Assistant Treasurer further stated that the reversal of the evidential burden of proof was consistent with the existing legislative framework of the CATSI Act, including the existing offence-specific defence in subsection 496-10(2).
2.70
In relation to principles within the Guide to Framing Commonwealth Offences, the Assistant Treasurer provided a detailed rationale for why the defendant would be best placed to raise evidence of actions taken in relation to their status as a restructuring and that this would be significantly more difficult and costly for the prosecution to disprove.
2.71
In response, the Scrutiny Committee requested that:
…the key information detailing why the relevant matters would be peculiarly within the knowledge of the defendant, and why these matters would be significantly more difficult and costly for the prosecution to disprove, be included in the explanatory memorandum, noting the importance of this document as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation …
2.72
The Scrutiny Committee also advised that, in light of the detailed information provided by the Assistant Treasurer, it would make no further comment on this matter.
Compatibility with human rights
2.73
A statement on compatibility with human rights was prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. The statement concluded that Schedules 1 and 3 were compatible with human rights. To the extent that Schedule 2 may limit human rights, these limitations were assessed as reasonable, necessary and proportionate.
2.74
The Parliamentary Joint Committee on Human Rights considered the bill and did not have any comment.
Financial impact statement
2.75
The financial impact of Schedule 1 on the underlying cash balance is estimated to be -$75 million over the forward estimates (Table 2.1).
Table 2.1: Impact of Schedule 1 on the underlying cash balance ($m)
Source: Explanatory Memorandum, p. 3.
2.76
The amendments in Schedule 3 of the bill are estimated to have a small but unquantifiable impact on receipts over the forward estimates. Schedule 2 has no financial impact.