Bills Digest No. 11, 2022–23

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Elo Guo-Hawkins and Julie Sienkowski
Economic Policy Section

Jaan Murphy
Law and Bills Digest Section
2 September 2022

Key points The Bill proposes amendments to various taxation and superannuation law to: allow the Commissioner of the Australian Taxation Office (ATO) to direct an entity to complete an approved record-keeping course where the Commissioner reasonably believes the entity has failed to comply with its tax-related record-keeping obligations, as an alternative to existing financial penalties introduce a new reporting regime for the sharing (‘gig’) economy (initially applying to ride-sharing and short-term accommodation online platform operators and then extending to all other types of sharing economy online platforms such as food delivery and task services) remove the $250 non-deductible self-education expenses threshold allow the Administrative Appeals Tribunal (AAT) to temporarily stay the operation or implementation of an ATO decision impacting a small business entity expand eligibility for downsizer superannuation contributions to those aged 55 and over (down from the current 60 year age requirement).

Contents

Purpose of the Bill
History of the amendments
Committee consideration
Schedule 1: Assisting businesses to meet their record-keeping obligations
Schedule 2: Sharing economy reporting regime
Schedule 3: Removing the self-education expenses threshold
Schedule 4: Increased Tribunal powers for small business tax decisions
Schedule 5: Expanding eligibility for downsizer contributions

 

Date introduced: 3 August 2022
House: House of Representatives
Portfolio: Treasury
Commencement: Various dates as set out in the main body of the digest.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at September 2022.

Purpose of the Bill

The Treasury Laws Amendment (2022 Measures No. 2) Bill 2022 (the Bill) amends various taxation and superannuation law for five separate purposes.

• Schedule 1 amends the Taxation Administration Act 1953 (TAA) to allow the Commissioner of Taxation (the Commissioner) to direct taxpayers (such as small business entities) to complete an approved record-keeping course, rather than  pay an administrative penalty, for failing to comply with record-keeping requirements.  
• Schedule 2 addresses the issues of transparency gap and uneven playing field between the fast-growing sharing economy and the rest of the economy.[1] Schedule 2 requires electronic platform operators (such as Uber and Airbnb) which facilitate sharing economy transactions, to provide certain information on transactions made through the platform to the ATO for data matching and prefilling purposes.
• Schedule 3 removes the $250 non-deductible self-education expenses threshold to reduce complexity and compliance costs among taxpayers who wish to claim deductions for work-related self-education expenses.
• Schedule 4 allows the Administrative Appeals Tribunal (AAT) to pause the effects of certain decisions of the Commissioner applying to small business entities during merits review of the decision.
• Schedule 5 amends the Income Tax Assessment Act 1997 (ITAA 1997) to allow individuals aged 55 and above to make downsizer contributions to their superannuation plan from the proceeds of selling their main residence.

As each schedule deals with a discrete topic, they are dealt with separately in this Digest.

History of the amendments

Schedules 1 to 4 of the Bill reproduce amendments that were introduced in Bills that lapsed at the dissolution of the 46th Parliament, as shown in Table 1.

Table 1: Comparison between the current schedules and their corresponding schedules in lapsed Bills

Schedule to the Bill	Corresponding schedule in lapsed Bill	Comparing the Bills (Current vs Lapsed Bills)
Schedule 1: Assisting businesses to meet their record-keeping obligations	Schedule 1 to the Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022	Identical
Schedule 2: Sharing economy reporting regime	Schedule 1 to the Treasury Laws Amendment (2021 Measures No. 7) Bill 2021	Identical, except for the 1-year delay of start dates.
Schedule 3: Removing the self-education expenses threshold	Schedule 3 to the Treasury Laws Amendment (2021 Measures No. 7) Bill 2021	Identical
Schedule 4: Increased Tribunal powers for small business tax decisions	Schedule 3 to the Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022	Identical
Schedule 5: Expanding eligibility for downsizer contributions	No previous Bill has dealt with this issue.

Committee consideration

Senate Standing Committee for the Selection of Bills

The Senate Standing Committee for the Selection of Bills recommended that the Bill not be referred to a committee for inquiry.[2]

Senate Standing Committee for the Scrutiny of Bills

At the time of writing this Digest, the Senate Standing Committee for the Scrutiny of Bills had not considered the Bill.

Parliamentary Joint Committee on Human Rights

At the time of writing this Digest, the Parliamentary Joint Committee on Human Rights had not considered the Bill.

Schedule 1: Assisting businesses to meet their record-keeping obligations

A Bills Digest was written for the lapsed Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022.[3] As Schedule 1 to the current Bill is identical to Schedule 1 to the lapsed Bill, the relevant part of the earlier Bills Digest is reproduced below, for readers’ convenience.

Background

Schedule 1 will amend the Taxation Administration Act 1953 (TAA) and other legislation to allow the Commissioner of the ATO (the Commissioner) to direct an entity to complete an approved record-keeping course (a tax-records education direction).

Schedule 1 to the Bill implements the Black Economy — Assisting businesses to meet their reporting obligations measure announced in the 2019–20 MYEFO.[4] The Black Economy Taskforce (the Taskforce) was established in 2016 to develop a policy response to combat the ‘shadow economy’ (or previously, the ‘black economy’)[5] in Australia: activities which take place outside the tax and regulatory systems, such as demanding cash payment to avoid tax obligations and not reporting or under-reporting income.[6] The report recognised that such issues cannot be effectively tackled by traditional law enforcement measures alone.[7]

The Taskforce’s Final Report (the Report) found that some businesses have genuine difficulty complying with their record-keeping obligations, resulting in omitted income being added to the black economy. The Report recommended:

• the requirements for tax-related record-keeping obligations should be clear and simple for entities carrying on businesses[8] and
• penalties for breaches of these rules should be designed so that the ATO has a range of administrative sanctions available at its discretion.[9]

In response to the Taskforce’s Report, the Morrison Government agreed that the requirements for tax record-keeping should be clear and simple, and that entities carrying on businesses should adhere to strong record-keeping practices.[10]

Schedule 1 will commence on the first 1 January, 1 April, 1 July or 1 October to occur after the day of Royal Assent. The Commissioner of Taxation will be able to issue a tax-records education direction to an entity three months after the day the Bill receives Royal Assent.[11]

Committee consideration

Committee consideration of the current Bill is set out on page 7 of this Digest. Below is a summary of committee consideration of Schedule 1 to the lapsed Bill:

• Senate Standing Committee for Selection of Bills:  the lapsed Bill was not referred to a committee for inquiry.
• Senate Standing Committee for the Scrutiny of Bills: had no comment on Schedule 1 to the lapsed Bill[12]
• Parliamentary Joint Committee on Human Rights: had no comment on Schedule 1 to the lapsed Bill.[13]

Policy position of non-government parties/independents

The position of non-government parties and independents on the measures contained in Schedule 1 to the Bill could not be determined at the time of writing.

Position of major interest groups

The position of major interest groups and stakeholders on measures contained in Schedule 1 to the Bill could not be determined at the time of writing.

Financial implications

The Explanatory Memorandum to the Bill summarises the financial impact for Schedule 1 as follows:

The 2019-20 MYEFO estimated the measure Black Economy - Assisting businesses to meet their reporting obligations - would have a small but unquantifiable gain to the budget over the forward estimates period.[14]

Compliance cost impact

Negligible.[15]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible. Specifically, the Government considers that Schedule 1 does not raise human rights issues.[16]

Key issues and provisions

Schedule 1 will amend the TAA and other legislation to allow the Commissioner to direct an entity to complete an approved record-keeping course (a tax-records education direction) as an alternative to the existing civil penalties, where the Commissioner reasonably believes the entity has failed to comply with its tax-related record-keeping obligations.

Current requirements to keep tax-related records

The scope of an entity’s record-keeping obligations depends on its nature, size, and structure. In general, the tax law record-keeping provisions require entities carrying on a business or subject to indirect tax obligations to keep records:

• that record and explain transactions and other acts related to their tax affairs which enable their tax liability to be readily ascertained
• are in English (or are readily accessible and easily convertible into English)
• for 5 years after they are prepared or obtained, or 5 years after the completion of the transaction or acts to which they relate (whichever is later).[17]

Current penalties for failure to meet tax recording keep requirements

Generally, where an entity is required to keep or retain records under a taxation law and fails to do so in the manner required, they will be liable to an administrative penalty under section 288-25 in Schedule 1 of the TAA.[18] However, section 298–20 in Schedule 1 of the TAA allows the Commissioner to cancel or refrain from imposing all or part of such an administrative penalty.

2018 Treasury consultation paper

The 2018 Treasury consultation paper Improving Black Economy Enforcement and Offences requested submissions in response to the question: ‘what non-financial penalties could be considered to enhance compliance with tax law?’.[19]

Whilst travel bans and bankruptcy-style lists were suggested in the consultation paper[20] there appears to have been no suggestion regarding tax-record education directions. Submissions to this consultation were not published and Treasury did not produce a publicly available report on the outcome of the consultation. Submissions that have been published on their own websites by submitters do not discuss education as an enforcement measure.

As such, prior to the measure Black Economy – assisting businesses to meet their reporting obligations being announced in the 2019-20 MYEFO[21] there appears to have been no formal recommendation, consultation or proposal to introduce a tax-records education regime in response to the Black Economy Taskforce’s Final Report recommendation. That aside, given that the TAA contains an existing education directions framework the measure can be seen as broadly consistent with the recommendation that the ATO has a range of administrative sanctions available at its discretion.[22]

Summary of proposed power to issue a tax-records education direction

The amendments in Schedule 1 will enable the Commissioner to issue a tax-records education direction requiring an entity to complete an approved record-keeping course.

The purpose of a tax-records education direction is to directly address the knowledge gaps and reduce cases of non-compliance with record keeping obligations by helping entities better understand their tax-related record-keeping obligations.[23] They will operate as an alternative to the administrative penalties that apply where an entity has failed to meet its record-keeping obligations under a taxation law.[24]

Existing education direction framework

The proposed tax-records education direction will be implemented by amending the existing education direction framework in Division 384 in Schedule 1 of the TAA. That framework allows the Commissioner to give an education direction to an entity requiring a specified course of education to be undertaken where the Commissioner reasonably believes the entity has failed to comply with certain obligations arising under taxation laws. It also allows the Commissioner to approve courses of education.[25]

Under the existing TAA framework an education direction must be in writing and:

• specify the approved course that must be undertaken by:
  • the taxpayer (if a sole trader or individual) or
  • an individual who makes, or participates in making, decisions that affect the whole, or a substantial part, of the taxpayer’s business[26] and
• specify the period within which the entity must comply with the direction (which must be a period that is reasonable in the circumstances).[27]

The direction requires that the entity ensure that a specified approved course of education is undertaken by the appropriate person and provide the Commissioner with evidence that the relevant individual has completed the course.[28]

What is a tax-records education direction?

A tax-records education direction is a written direction from the Commissioner to:

• undertake an approved course of education specified by the Commissioner and
• provide the Commissioner with evidence of completion of the course.[29]

When can a tax-records education direction be issued?

The amendments in Schedule 1 will enable the Commissioner to issue a tax-records education direction requiring an entity to complete an approved record-keeping course where the Commissioner reasonably believes that:

• there has been a failure to comply with one or more specified record-keeping obligations under a taxation law where non-compliance gives rise to an administrative penalty under section 288- 25 of Schedule 1 to the TAA and
• the entity is not disengaged or deliberately avoiding their record-keeping obligations.[30]

That is, it is intended that the Commissioner will issue a tax-records education direction to an entity where they reasonably believe that the entity has made a reasonable and genuine attempt to comply with (or believed they were complying with) their tax record-keeping obligations.[31]

The Commissioner will be able to issue a tax-records education direction to an entity three months after the day the Bill receives Royal Assent.[32] Importantly, the amendments will apply to failures to comply with record-keeping obligations under a taxation law that occur both before and after the Bill receives Royal Assent.[33] In that regard the Explanatory Memorandum states:

Providing the Commissioner with the ability to issue a tax-records education direction in relation to breaches of record keeping obligations that occurred before the commencement of the Bill is appropriate and wholly beneficial to businesses. This is because the amendments will allow entities to choose to complete the approved record-keeping education course as an alternative to paying the financial administrative penalties if they wish.[34]

What does a tax-records education direction require a taxpayer to do?

A tax-records education direction requires the entity to:

• complete or arrange for the completion of the approved course of education before the end of the specified period set out in the written direction and
• provide the Commissioner with evidence of completion of the course.[35]

Under the existing education framework in the TAA, the Commissioner of Taxation or other entity providing an approved course of education may charge fees for the course.[36] However, in the second reading speech to the Bill the Assistant Treasurer stated that ‘the education course will be free’.[37] 

A tax-records education direction will operate as an alternative to the existing administrative penalty that applies where an entity has failed to meet its record-keeping obligations under a taxation law.[38]

What are the consequences for failing to comply with a tax-records education direction?

If an entity fails to comply with a tax-records education direction they will be liable to the original administrative penalty as set out in section 288-25 of Schedule 1 to the TAA.[39] That is, there are no additional penalties applied if an entity does not comply with a tax-records education direction.

Schedule 2: Sharing economy reporting regime

Background

The problems identified in a fast-growing sharing economy  

The ‘shadow economy’ refers to dishonest and criminal activities that take place outside the tax and regulatory systems. It is a complex and multi-faceted phenomenon that impacts tax, workplace relations, financial, welfare, procurement and migration systems. The shadow economy impacts all Australians by penalising honest taxpayers, undermining the integrity of Australia’s tax and welfare systems, and creating an uneven playing field for the majority of small businesses doing the right thing.[40] The impact is being felt by many businesses and consumers, including those in the sharing economy.

Facilitated through an electronic platform, the sharing economy involves two parties entering into an online agreement for one to provide services and/or loan personal assets to the other, for a payment. [41]  The sharing economy has grown significantly in recent years, facilitating innovation, job growth and more choice for consumers. The internet has helped to formalise sharing economy activities and created opportunities for parties to earn a regular income. However, the growth of sharing economy has also resulted in a transparency gap because tax reporting systems currently do not adequately capture information about transactions in this part of the economy.[42] The Black Economy Taskforce Final Report (the Report) noted that there is a risk that sharing economy sellers misreport tax amounts either due to their:

• lack of awareness of associated tax obligations, or
• deliberate undertaking of shadow economy activities in the sharing economy.[43]

In 2017, the Organisation for Economic Co-operation and Development (OECD) suggested that the sharing economy raises three fundamental tax issues:

• uncertainty amongst platform sellers on what their tax obligations are
• lack of visibility to tax administrations, due to the non-traditional nature of payments
• the platform provider may not be in the same jurisdiction as the platform seller, and therefore it may be difficult to get information compared to a provider located domestically. [44]

An OECD policy note noted options to address challenges associated with the sharing economy, including:

• improving taxpayer education and self-reporting
• improving information accessible to tax administrations
• exploring a multilateral agreement between countries to facilitate access and exchange of information on a more consistent basis.[45]

This ‘might require all platforms carrying out particular types of activity to provide information in a standardised format on platform users, transactions and income to the tax authority in their jurisdiction of residence for exchange, through appropriate legal gateways, to the jurisdiction of tax residency of the user’.[46]

Size of the problem

In 2016, it was estimated that the size of the shadow economy had likely doubled since 2012 from 1.5% of GDP to around 3% of GDP, or approximately $50 billion.[47] For that reason, the Black Economy Taskforce (the Taskforce) was established to combat the shadow economy.

In February 2017, it was suggested that Australia’s sharing economy was worth approximately $15.1 billion. An estimated 10.8 million Australians were predicted to earn extra money from sharing economy services from July to December 2017. Deloitte estimated that revenue generated by the collaborative economy in New South Wales alone increased approximately 68 per cent between 2014-15 and 2015-16, with an increase in users of 108 per cent.[48]

In 2018-19, the overall tax gap, which included the shadow economy activities, was estimated at around $33.5 billion, or 7.3% of the tax that should have been reported. It should be noted that by June 2021, after a few other shadow economy recommendations were implemented, the ATO had raised an extra $2.6 billion tax revenue.[49]

The proposed solution - a new reporting regime for the sharing economy

In October 2017, the Black Economy Taskforce Final Report was released. Recommendation 6.2: A sharing economy reporting regime, which is re-produced in the current Explanatory Memorandum,[50] recommends that designated sharing economy websites should be required to report payments made to their users to the ATO and other government agencies as appropriate. The Government’s response to Recommendation 6.2 is set out in Schedule 2 to the Bill.

In July 2017, the Board of Taxation also published a report to the Government on Tax and the Sharing Economy.

In the 2018–19 Budget, the former Government announced a whole-of-government program for tackling the shadow economy in response to the Final Report. The former Government further promised that it would consult with stakeholders on how it could implement the Taskforce recommendation for a sharing economy reporting regime.[51]

By February 2019, the former Government finalised a consultation on Recommendation 6.2 and received 37 submissions.[52] (Please see further discussions under the ‘2019 Treasury Consultation Paper’ section of this Bills Digest).In the 2019–20 Mid-Year Economic and Fiscal Outlook, the former Government announced the introduction of a third-party reporting regime for the sharing economy to increase the transparency of payments made via platforms and help to ensure sellers are meeting their tax obligations.[53]

On 25 August 2021, Schedule 1 to the Treasury Laws Amendment (2021 Measures No. 7) Bill 2021 introduced the reporting regime for the first time. However, the Bill lapsed at the end of the 46th Parliament, after having its third reading agreed to in the House of Representatives.

On 3 August 2022, the current Bill was introduced, which revives the lapsed schedule with the commencement dates being deferred by one-year.

Impacted population

• Directly impacted population - Operators of an electronic service, such as a website, internet portal, app, gateway, store or marketplace (a platform) that allows buyers and sellers to transact will be required to report information to the ATO on certain transactions.[54]
• Indirectly impacted population - Platforms users who may be required to provide information to platform operators beyond what they are currently providing or undertake additional verification requirements as determined by the platforms. They may also receive education prompts from the ATO to encourage them to ensure that all income obtained from the sharing economy is declared.

Start dates

The amendments commence on the first 1 January, 1 April, 1 July, or 1 October after the day of Royal Assent. The reporting requirements will apply from:

• 1 July 2023 for ride-sourcing and short-term accommodation platforms.
• 1 July 2024 for all other platforms including asset sharing, food delivery, tasking-based platforms.[55] 

How will the new regime work?[56]

The applicable transactions and exemptions under Schedule 2

Unless an exemption applies, platform operators will generally be required to report transactions for:

• all services
• the sharing or loaning of assets.[57]  

Some common examples of sharing economy platforms include: ride-sourcing (such as Uber) short-term accommodation (such as Airbnb and StayZ) asset sharing (such as Car Next Door) food delivery (such as Menulog, DoorDash, Uber Eats and Deliveroo) task-based (such as Airtasker). Where a platform connects two separate entities (the buyer and seller) and facilitates the complete transaction between them, then – assuming that the transaction is in scope and they meet the requirements of being an Electronic Distribution Platform – those transactions will likely be reportable under this law.

Platform operators will not be required to report the following exempted transactions:

• where only the title or ownership of goods are exchanged
• for financial supplies, such as crowdfunding and financial securities trading
• relating to the transfer of ownership of real property
• where the service, loaned assets, or property does not take place in Australia
• that are subject to another tax reporting requirement, such as employer-employee withholding, or the Taxable Payments Reporting System (TPRS)
• arising from an online classifieds, listing, or advertising service
• where the seller is also the operator of the platform.[58]   

When is a platform operator not required to report to the ATO in this new reporting regime? Ultimately whether a platform or transaction is in scope will depend on how it is structured, and from a compliance perspective the ATO has not made any determinations regarding who is in and who is out of the reporting regime. Platforms that will not be captured are those that merely advertise, or link to, services provided by other platforms or entities. In these cases, the platforms are generally just receiving a commission and are not facilitating the complete transaction between buyer and seller.

Example 1: Is a sale of a car through an electronic distribution platform within the scope of Schedule 2 to the Bill? The sale of a car through an electronic distribution platform will be exempted under proposed paragraph (d)(i) of Item 15 of the table under section 396-55 in Schedule 1 to the Taxation Administration Act 1953, as it is a supply by way of transfer of ownership of goods within the meaning of A New Tax System (Goods and Services Tax) Act 1999 (the GST Act).

Example 2: Are hire purchase arrangements within the scope of Schedule 2 to the Bill? Hire purchase arrangements are for tax purposes defined in s 995-1 of the Income Tax Assessment Act 1997 and require a contract for purchase at the end of the leasing term. They are essentially a legal financing mechanism rather than a more ad hoc, short-term arrangement between buyer and seller. While it ultimately depends on the nature of the transaction, such arrangements appear to be excluded from this reporting regime because they involve the transfer of ownership of a good or real property. However, the ATO will work with the platforms in determining their reporting eligibility after the Bill receives Royal Assent.

What information will need to be reported by operators?

The ATO will specify the information required, including those relating to:

• the seller’s identification
• the money exchanged in the transaction
• the aggregate (not a per transaction basis) of the seller’s transactions over the reporting period.[59]

Table 2: Minimum information required by the ATO under Schedule 2

Source: Introducing a Sharing Economy Reporting Regime – Fact Sheet for Exposure Draft Legislation (June 2021), 2

Frequency of reporting will be specified by the ATO

The reporting frequency is currently once a year under section 396-55 of Schedule 1 to the TAA.

However, the Treasury has flagged that the operators may report twice a year (1 July – 31 December, 1 January – 30 June) with reporting due dates are 31 January and 31 July respectively.[60]

Information is reported via ‘approved form’ using the Taxable Payments Reporting System (TPRS)

The sharing economy reporting regime will be implemented by applying the TPRS to certain transactions undertaken through electronic platforms.[61]

How will the ATO use the data?

The ATO will use the reported information for income matching and potentially prefilling tax returns, hence reducing the compliance burden on taxpayers.

Example There is a risk that some taxpayers who provide short-term accommodation may believe that the income which they earn when renting out the property may not be assessable, particularly where they only supply accommodation infrequently and assume their level of activity constitutes a hobby and does not require reporting. The ATO will match the data provided by the rental platforms against ATO records to identify individuals who rent property on a short-term basis but may not be meeting their registration, reporting, lodgment and/or payment obligations.

What will the data-sharing arrangements be like?

The ATO may share the collected data with other government agencies but only under existing data-sharing provisions. [62] The ATO was not granted any additional authority to share with other government agencies data received from third parties as required under the amendments.  The ATO currently shares aggregated taxable income tax data with other Commonwealth, state and territory government agencies under existing legal powers and administrative Memoranda of Understanding. The data may assist with the identification and collection of GST liabilities where there is a pre-existing legal requirement for GST registration and reporting, for example, in the ride-sourcing industry.

Compliance burden on platforms and platforms users

Schedule 2 may require infrastructure changes to the platforms and may impose other compliance cost on businesses. As mentioned in the ‘Consultations and committee consideration’ section of this Bills Digest, most platform operators expressed a general willingness to comply with the reporting requirement, with a strong preference for minimising compliance burdens, aligning with international standards, and ensuring that reporting obligations apply broadly across all business models and industries.

The measure is estimated to result in a total average annual regulatory cost of $22,000, which is consistent with the Government’s Regulation Impact Statement (RIS) requirements.[63] (See details in the ‘Regulatory Impact Statement (RIS)’ section in this Bills Digest).

It is expected that once the platforms transition to periodic reporting and automating data collection, the compliance burden may be lowered in the long run. It would also allow a reduction in compliance costs for a larger number of sharing economy sellers.

The individual platform operator may or may not pass on any additional compliance costs to the users of the platform. This is a consideration for individual operators.

Data privacy

As with all data collected by the ATO, data collected under Schedule 2 to the Bill will be protected by the Privacy Act 1988 and the strict secrecy provisions of the Income Tax Assessment Act 1936, the TAA and other tax laws, as well as the Australian Privacy Principles and the Australian Government Privacy Code.[64] Strong civil and criminal penalties exist for persons who violate these provisions, including for taxation officers.

Level playing field with overseas platforms

There can be uneven playing field between domestic and international platform operators where overseas operators may not feel compelled to follow Australian obligations and may be restricted by data protection requirements in other jurisdictions. Many countries are grappling with the issue of access to information by overseas platforms. The OECD has raised the possibility of a multilateral instrument to facilitate access and exchange of information between countries on a more consistent basis.[65]

Compliance

The reporting regime relies on quality and timely information reported by the operators. Effective incentives such as warning notices and consequences may need to be developed to ensure compliance.

Public consultations

Extensive industry consultation has occurred throughout the development of the measure to inform its design and implementation. This includes a consultation paper process from January to February 2019, targeted industry consultations in 2020 and 2021,[66] and public consultation on the Exposure Draft legislation from July to August 2021. This builds on the consultations conducted by the Board of Taxation and the Black Economy Taskforce in 2017.

This Bills Digest does not repeat the Taskforce findings and reported stakeholder views as they are already reproduced in Attachment 1 of the Explanatory Memorandum to the Bill. However, information on the more recent consultations and committee consideration is set out below.   

2019 Treasury Consultation Paper

• Purpose As the Report did not provide detail on the design of the proposed sharing economy reporting regime, the former Government sought public views on the possible design characteristics via the January 2019 Treasury consultation paper.
• Important factors to consider for a new reporting regime – the consultation paper considered that the regime should:
  • promote a positive user experience
  • influence behavioural change in reporting taxable income
  • adopt a light touch regulatory approach
  • ensure a level playing field
  • ensure sufficient and reliable information is periodically received by the Government in a standardised format. ^[67]
• Two options were proposed:
  1. (Preferred Option) Reporting by sharing economy platforms – this option was preferred by the majority of the submitters[68] and was used as the basis to prepare the Exposure Draft legislation in 2021.
  2. Reporting by Financial Institutions – not discussed in this Bills Digest. ^[69]

There were 37 submissions received for this consultation, including 9 confidential submissions. Twenty-eight submissions are published online.  

Concerns expressed by the minority submitters

A few submitters[70] raised concerns over the legal treatment (such as employment status) of gig economy workers; or proposed that separate definitions (and reporting regimes) should apply to the gig and sharing economy. However, these discussions are beyond the scope of this Bills Digest.

The Housing Industry Association (HIA) ‘does not accept that a new reporting regime is required’ and believes that ‘existing regimes are working to capture this information.’[71] The HIA was also ‘concerned that a response to the sharing economy may have unintended consequences for other sectors of the economy, including the residential building industry’ which has ‘well established modes of engagement’ of mainly independent contractors.[72]

Queensland Law Society raised concerns about the imposition and potential cost of additional regulatory compliance for private entities; and privacy issues with respect to the collection and sharing of information between other unrelated departments.[73]

Self Employed Australia submitted that ‘[a]utomated reporting of platform income and the semi-automated populating of tax returns add to business and taxpayer record-keeping efficiency. The Treasury recommendations concerning taxpayer education and taxpayer entrepreneurship however are deeply inadequate. They reflect a one-dimensional view of the purposes of taxation and tax reporting.’[74]

2021 Exposure Draft consultation

The key documents for the 2021 Exposure Draft consultation are at Implementing a reporting regime for sharing economy platform providers.

The Treasury published the exposure draft and explanatory material to the Treasury Laws Amendment (Measures for Consultation) Bill 2021: Introducing a sharing economy reporting regime. These two documents provided the basis for the current Schedule 2. No submissions are publicly available.

Committee consideration

Committee consideration of the current Bill is set out on page 7 of this Digest.

The committee consideration of the lapsed Treasury Laws Amendment (2021 Measures No.7) Bill 2021 is relevant because Schedule 1 of that lapsed Bill is almost identical to Schedule 2 of the Bill, except for the one-year delay in commencement dates. Below is a summary of committee consideration of Schedule 1 to the lapsed Bill:

• Senate Standing Committee for Selection of Bills: recommended that the lapsed Bill be referred to the Senate Economics Legislation Committee for inquiry and report by 14 October 2021—see further discussion below. ^[75]
• Senate Standing Committee for the Scrutiny of Bills: had no comment on the Schedule 1 to the lapsed Bill.[76]
• Parliamentary Joint Committee on Human Rights: had no comment on the Schedule 1 to the lapsed Bill.[77]

2021 Senate Economics Legislation Committee consideration

The lapsed Bill was referred to the Senate Economics Legislation Committee in August 2021. Details of the public inquiry are at Treasury Laws Amendment (2021 Measures No. 7) Bill 2021 [Provisions].The committee undertook a public hearing on 6 October 2021 and collected additional information from Deliveroo and the Treasury, before publishing its report on 14 October 2021.

Committee Recommendation

The committee was satisfied that the Bill would deliver on its intent and recommended the entire Bill be passed.[78]The committee commented that ‘there is utility in the Treasury and the ATO maintaining a dialogue with stakeholders and interested parties to ascertain if further fine tuning is necessary during implementation.’ [79]

Summary of the submissions[80]

The committee received 10 submissions which were published on its inquiry website.The ‘sharing economy reporting regime’ at Schedule 1 of the lapsed Bill received most attention from the submitters.[81]The committee noted the broad support for this schedule which is an important first step in addressing tax discrepancies in the online marketplace.[82]The committee recognised that the main concerns revolved around definitional questions and the extra bureaucratic requirements and how this may hinder business operations. However, the committee took the view of the Tax Institute, that there would appear to be enough discretion within the arrangements to accommodate the concerns expressed.[83]

Concerns expressed by the submitters

Uber was supportive of the amendments but felt further streamlining of the process was necessary.[84] 

Airtasker supported the legislation in-principle but expressed concerns over two issues.[85] First, the new data collection processes may cause unnecessary ‘frictions’ and hence reduce job opportunities. Second, Airtasker is also concerned with user privacy when data is shared liberally and over a long period of time with a ‘backdoor type approach’. 

Mable Technologies supported the amendments in-principle but welcomed clarity on how they were to function.[86]  

Hireup also supported the amendments, but felt further issues needed to be addressed, for example, ensuring NDIS-related platforms are taking responsibility for their legal obligations and workforce.[87]

Deliveroo expressed concerns about the definitions of sharing and gig economies and felt that clarification was necessary so that they, and perhaps other businesses like them, would not be unnecessarily required to participate in the reporting regime.[88]

Menulog supported the legislation in-principle, but felt it was cumbersome in its present form. Menulog recommended amendments which it believed would make the legislation more workable.[89] Tech Council also expressed similar sentiments. [90]

The Tax Institute suggested that the legislation as it stands, coupled with the discretionary powers of the ATO, is sufficient to achieve the stated goals.[91]

Financial implications

The Explanatory Memorandum states that Schedule 2:

• ‘is estimated to have a cost to the budget of $8.2 million over the forward estimates period’ [92] (reflecting the combined impact of the originally announced measure in 2019-20 MYEFO and the one year delay in commencement)
• ‘also includes an estimated increase to GST payments to the States and Territories of $13.5m over the same period’ [93]
• over the medium term, the measure is expected to have a positive impact on the budget reflecting improved tax compliance by sharing economy participants.

All figures in this table represent amounts in $[m].

2021-22	2022-23	2023-24	2024-25	2025-26
-7.2	-7.3	-5.0	+4.9	+6.4

Compliance cost impact

Minimal.[94]

Regulatory Impact Statement (RIS)

RIS Status: Compliant

Assessment Rating: Independent Review

Post-Implementation Review Required: No

Regulatory Burden: - $0.022 m

The Black Economy Taskforce Final Report considered several alternative options to a reporting regime, including withholding income tax from payments made to sharing economy users, and creating a bright-line test to distinguish between hobby and business activities. It was concluded that the least onerous option would be to introduce a third-party reporting regime requiring operators of electronic platforms to report information to the ATO relating to transactions facilitated through their platform.[95]

Statement of Compatibility with Human Rights

The Government considers that Schedule 2 to the Bill is:

• compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011[96]
• consistent with Article 17 of the International Covenant on Civil and Political Rights (ICCPR) on the basis that its engagement of the right to privacy (by requiring platforms to provide the ATO with a range of personal information about individuals that the platforms collect in the course of their business) will neither be unlawful nor arbitrary..[97]

Key issues and provisions

Key Issues

• Transparency gap: The fast growing sharing economy has resulted in a tax transparency gap because the current tax reporting systems do not adequately capture information about transactions in this part of the economy.
• Uneven playing field created: There is a risk that sharing economy sellers misreport tax amounts either due to their:
  • lack of awareness of associated tax obligations, or
  • deliberate undertaking of shadow economy activities in the sharing economy.

Provisions

Current provisions

A sharing economy specific reporting regime is needed because the following existing reporting regimes are unsuitable:

• the Taxable Payments Reporting System (TPRS)
• Single Touch Payroll (STP)
• the general information gathering powers of the Commissioner under section 353-10 of Schedule 1 to the TAA.

Why are the current tax provisions not suitable for a sharing economy reporting regime? ‘TPRS currently applies to the high-risk industries of building, construction, cleaning, [courier, road freight, security, investigation, surveillance or information technology services] and requires entities annually to report payments to contractors for providing services on their behalf to the ATO. This model only applies to contractors who hold ABNs, which may limit application if extended to sharing economy platforms where the seller may not be a contractor. TPRS is limited in the content, frequency and format of its data requirements, which would constrain the information required by the ATO for sharing economy activities and potential future international reporting standards. STP currently requires employers with 20 or more employees to report payments such as salaries and wages from their payroll system to the ATO. However, many sharing economy sellers may not be classified as employees and therefore outside the scope of STP obligations. While requesting information under section 353-10 of Schedule 1 to the TAA can identify sharing economy activity, the ATO cannot enforce the quality of data provided nor its format. Consequently data received can be difficult to match to existing ATO information and systems.’ [98]

Explainer: the proposed new item 15 to section 396-55 of Schedule 1 to the TAA

The TPRS is located in sub-division 396–B of Schedule 1 to the TAA and is a framework that outlines when specific entities are required to report information about certain transactions to the ATO.

Types of entities mentioned in the framework are required to provide information to the ATO in an approved form. The default frequency of reporting is each financial year; however, the Commissioner of Taxation can substitute another reporting frequency for specific types of entities required to report under the framework.[99] 

Schedule 2 to the Bill inserts ‘the operator of an electronic distribution platform’ into the TPRS so the reporting requirements under the framework apply to certain transactions made through an electronic platform. The operators of electronic platforms will be required to provide information regarding these transactions to the ATO.

Generally, if an electronic platform facilitates a supply that is connected to Australia for consideration between two entities, then the operator of the platform is required to report information about the transaction to the ATO. The information required must only relate to the identification, collection or recovery of a possible tax related liability or possible reduction of a tax related liability.[100] The requirement will not apply if the transaction only relates to a supply of goods where ownership of the goods is permanently changed, where title to real property is transferred, or the supply is a financial supply.[101] The reason information does not need to be reported for these types of transactions is because these transactions are not taxable or present a lower risk from a compliance perspective.

The requirement will also not apply if the transaction occurs between entities that are members within the same consolidated group or multiple entry consolidated (MEC) group.[102] Platforms will also not be required to report transactions subject to a withholding obligation under Division 12 of Schedule 1 to the TAA – for example, pay as you go (PAYG) income tax withholding.[103]

Schedule 3: Removing the self-education expenses threshold

Background

The problem of compliance costs associated with the $250 threshold

Currently the first $250 of self-education expense for a prescribed education course is not deductible.[104] However, the threshold has no policy basis to support it. ^[105] It generates no extra revenue and imposes compliance costs on individual taxpayers while they calculate the deduction amounts.

Under the current rule, individual taxpayers can apply non-deductible education expenses[106] against the $250 threshold (for example, childcare while attending self-education courses). However, individuals would incur compliance costs as they must keep records of expenses (deductible or not) to justify how the $250 threshold is applied. It takes time for the taxpayers to work out whether the $250 threshold is met and how to divide between the deductible and non-deductible expenses (if any).

Employers are liable to fringe benefit tax (FBT) for providing work-related self-education expenses to their employees. Employers would reduce the taxable value of the fringe benefit by the otherwise deductible rule, provided record keeping requirements are met. Unlike income tax deductions, currently employers do not have to reduce work-related self-education expenses by $250 when working out the otherwise deductible amount.[107]

The proposed change

Following the former Government’s announcement in the 2021–22 Budget,[108] Schedule 3 to the Bill will remove this non-deductible $250 threshold from relevant tax legislation.

Impacted population

Individuals

Individual taxpayers will be able to claim deductions for the full amount of work-related self-education expense, not the net amount exceeding $250. Taxpayers will no longer be required to keep records to justify their application of the threshold, as the threshold will be removed.

Example Jane is an apprentice hairdresser studying hairdressing at a TAFE college. Her course fees, textbooks and public transport fares total $290, which are deductible work-related self-education expenses. Jane incurred $220 childcare expense while attending her course. Currently, Jane can apply $220 childcare expense against the $250 threshold, and another $30 of her deductible self-education expense to fully satisfy the $250 threshold. Jane can then claim $260 ($290-$30) as her income tax deduction. Jane keeps records of the childcare expense, course fees, textbooks, and public transport fares. After the Bill receives Royal Assent, Jane can claim a deduction of $290 and no longer needs to consider the $250 threshold as it will be removed. Jane will only be required to keep records relating to the $290 deductible work related self-education expense. She does not need to keep record of the non-deductible childcare expense.

Schedule 3 does not change:

• the way to determine whether a certain self-education outgoing is deductible or not under the general deduction provision[109]
• the tax position for non-work related self-education outgoing (for example, these outgoings remain undeductible).

Employers

There are no substantial changes to how employers would determine the taxable value for providing work-related self-education expenses, since employers are not required to remove $250 from the otherwise deductible amount for FBT purposes. Schedule 3 to the Bill removes the $250 non-deductible component for income tax purposes and consequently will also remove all the existing FBT references to the income tax provision that imposes the $250 threshold.[110]

Start dates

The first 1 January, 1 April, 1 July or 1 October to occur after the day of Royal Assent.

• The amendments to the Income Tax Assessment Act 1936 and Income Tax Assessment Act 1997 will apply to assessments for the 2022-23 income year and later income years.
• The amendments of the Fringe Benefits Tax Assessment Act 1986 apply to the FBT year starting on 1 April 2023 and to later FBT years.[111]

Public consultation

As mentioned in the Explanatory Memorandum,[112] in 2020 the former Government held a public consultation on the best tax arrangement(s) (if any) to encourage Australians to retrain and reskill to support their future employment and career.[113] One of the matters raised was the removal of the $250 threshold.[114] The idea received unanimous support among stakeholders and was subsequently announced in the 2021–22 Budget.[115]

Committee consideration

Committee consideration of the current Bill is set out on page 7 of this Digest.As discussed in the previous section of this Bills Digest, the Senate Economics Legislation Committee considered Schedule 3 to the lapsed Treasury Laws Amendment (2021 Measures No.7) Bill 2021,  which is the equivalent to Schedule 3 of the current Bill.The committee noted the broad support for the schedule and ‘is satisfied that these amendments be passed without further comment.’[116] The Schedule 3 amendments were agreed to in the House of Representatives, before the Bill lapsed due to the dissolution of the 46th Parliament.

Policy position of non-government parties, independents and major interest groups

The amendments are uncontroversial.

Financial implications

Schedule 3 is estimated to have a negligible impact on receipts over the forward estimates period.[117]

Compliance cost impact

Schedule 3 is expected to reduce compliance costs for individuals claiming self-education expense deductions.[118]

Statement of Compatibility with Human Rights

The Government considers that Schedule 3 to the Bill is compatible with human rights as it does not raise any human rights issues.[119]

Key issues and provisions

The compliance cost (such as record keeping requirement and time required to follow the complex rules) on the affected individual and employer taxpayers is high and unnecessarily incurred for a tax provision[120] that has stopped serving its original policy intent 37 years ago.The removal of this tax provision will reduce compliance costs and has been unanimously agreed to among stakeholders and the Senate Economics Legislation Committee. The proposal passed the House of Representatives in the 46th Parliament.Section 82A of the Income Tax Assessment Act 1936 will be repealed by item 26 of Schedule 3 to the Bill and references to this section will be removed from the following tax legislation:

•   Income Tax Assessment Act 1936 (items 18 to 27 of Schedule 3)
•   Income Tax Assessment Act 1997 (items 28 to 32 of Schedule 3)
•   Fringe Benefits Tax Assessment Act 1986 (items 1 to 17 of Schedule 3).

Schedule 4: Increased Tribunal powers for small business tax decisions

Background

This schedule seeks to amend the Taxation Administration Act 1953 to enable small business entities to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal (AAT) for an order staying, or otherwise affecting, the operation or implementation of decisions of the Commissioner of Taxation that are being reviewed by the AAT.

For low-risk debt recovery cases, it means that the taxpayers can seek an AAT order to stay the Commissioner’s debt recovery action while a review of tax liability for, or quantum of, the tax debt is taking place. The Bill allows the affected taxpayers to seek a faster and cheaper AAT order of stay, instead of resorting to the traditional court judicial review proceeding.

The new approach does not significantly alter the ATO’s current approach to debt recovery as the Commissioner does not usually pursue debt recovery action while a debt is under dispute. For example, in 2018-19 financial year, there were less than 30 instances where the Commissioner pursued debt recovery action while the debt was under dispute.[121]

The proposed change

Following the former Government’s announcement in the 2021–22 Budget, [122] Schedule 4 proposes to empower the AAT to consider and balance the competing objectives of facilitating the Commissioner’s impartial administration of the tax system, and ensuring that undue hardships are not imposed on small businesses until decisions relating to them are final.The AAT can pause or modify ATO debt recovery action in relation to disputed debts that are being reviewed by the Small Business Taxation Division of the AAT. In the second reading speech to the Bill, the Assistant Treasurer advised:     

These orders will be subject to integrity checks intended to prevent aggressive taxpayers without genuine disputes from receiving stay orders sought with the intention of frustrating the recovery of genuine tax debts.[123]It was suggested that ‘small businesses will save in court and legal fees and as much as 60 days waiting for a decision, as compared to the current process of applying to a state or federal court for a stay on debt recovery.’ [124]

Impacted population

• Small business entities:
  
  • From 1 July 2016, a small business entity is a sole trader, partnership, company or trust that operates a business for all or part of the income year, and has a turnover less than $10 million.
  • For previous income years, a small business entity had a turnover that is less than $2 million. ^[125] 

Start date

The day after Royal Assent.

Treasury consultation

The former Government undertook a public consultation on the draft legislation in January 2022.[126] Submissions provided to the consultation are not currently available.

Committee consideration

Committee consideration of the current Bill is set out on page 7 of this Digest.Schedule 3 to the lapsed Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022 is identical to Schedule 4 to the current Bill.

Summary of committee consideration for the lapsed Bill

• Senate Standing Committee for the Scrutiny of Bills did not comment on the relevant schedule of the lapsed Bill.[127]
• Senate Standing Committee for Selection of Bills: did not consider the lapsed Bill prior to the dissolution of the 46th Parliament.
• Parliamentary Joint Committee on Human Rights: had no comment on the lapsed Bill.[128]

Position of non-government parties/independents/major interest groups

The position of non-government parties and independents on the measures contained in Schedule 4 could not be determined at the time of writing.

Financial implications

Schedule 4 ‘is estimated [to] have a small but unquantifiable cost to cash receipts.’[129]

Compliance cost impact

Schedule 4 is estimated to have a minor impact on compliance costs.[130]

Statement of Compatibility with Human Rights

The Government considers that Schedule 4 is compatible with human rights as it does not raise any human rights issues.[131]

Key issues and provisions

Key issues

Schedule 4 provides an avenue for small businesses to ensure they are not required to start paying a disputed debt until the matter has been determined by the AAT. The Explanatory Memorandum to the Bill states:

The purpose of the amendments is to provide small business entities with a cheaper, faster and simpler way to pause the effects of a decision to recover a tax debt during merits review of the decision as compared to applying to a court.[132]

However, the small business applicants must also satisfy the AAT that they meet the additional requirements set out by the amendments which are intended to maintain the integrity of the tax system and restrain people from using an application for a stay order to frustrate the prompt recovery of genuine tax debts. [133]

Key provisions

Current law

The collection and recovery of unpaid tax-related liabilities is covered by a common set of rules under Part 4–15 of Schedule 1 to the TAA. This regime applies to all tax-related liabilities. A tax related liability is defined[134] as a pecuniary liability to the Commonwealth arising under a taxation law.[135]

Examples of tax-related liabilities A non-exhaustive list of tax-related liabilities include income tax, PAYG instalments, PAYG withholding amounts, withholding tax on dividends, interest and royalties, mining withholding tax, franking tax, family trust distribution tax, trustee beneficiary non-disclosure tax, excessive tax offset refunds, GST, FBT and FBT instalments, overpayment of Coronavirus economic response payments (e.g. JobKeeper), cash flow boost overpayments, compulsory repayments under the HELP scheme, compulsory Trade Support Loan (TSL) repayment amounts, administrative penalties, director penalties, GIC, the shortfall interest charge, PAYG withholding non-compliance tax, the superannuation guarantee charge, unclaimed superannuation, amounts in respect of lost home super saver (FHSS) tax, Medicare levy, Medicare levy surcharge and Financial Supplement (FS) assessment debts.[136]

When a tax (such as income tax or GST) becomes due and payable, it is a debt due to the Commonwealth of Australia.[137] Liability to pay tax is a civil one, so failure to pay does not generally expose the taxpayer to criminal remedies.[138]

The Commissioner, a Second Commissioner or Deputy Commissioner may sue for and recover unpaid tax as a civil debt in any court of competent jurisdiction (that is, in every court which by enactment is made competent to entertain a claim for recovery of unpaid tax).[139]

Currently, if the Commissioner commences proceedings to recover unpaid tax, or petitions the court for a sequestration or winding-up order on the basis of the taxpayer’s failure to pay a tax debt, the taxpayer can apply to the court for a stay of proceedings or dismissal of the petition.

However the AAT has no power to stay recovery proceedings.[140] Liability to pay assessed tax, additional tax or any other amount is not suspended pending the outcome of an application for review or appeal.[141] Thus, once assessed tax or any other amount (e.g. penalties and GIC) becomes due and payable, the Commissioner is entitled to take whatever steps necessary and appropriate to recover the tax or other amount. This rule applies even if any objection, review or appeal under TAA Part IVC, or any further appeal, is still outstanding.[142] The AAT is specifically prevented from granting a stay of execution of the judgment debt pending determination of the review proceedings before it.[143]

Proposed change: Schedule 4 to the Bill

Following the announcement in the 2021-22 Budget, the proposed amendments in Schedule 4 to the Bill seek to extend the AAT’s power to pause or modify ATO debt recovery action over debts that are being reviewed by its Small Business Tax Division (SBTD). Small business entities that file an application in relation to tax matters before the SBTD will be able to apply for a pause or modification of the Commissioner’ debt recovery actions (such as garnishee notices and recovery of GIC and related penalties) under the proposal, until the underlying dispute has been decided. [144]

However, in exercising this new power, the AAT must also consider additional factors in the context of both the particular circumstances of the taxpayer whose decisions is under review and on the overall taxation system. The AAT must not make an order if the taxpayer’s application for review and request to make the order are ‘frivolous, vexatious, misconceived, lacking in substance or otherwise intended to unduly impede, prejudice or restrict the proper administration or operation of a taxation law’.[145] for example, applications from aggressive taxpayers who are phoenixing operators, promoters of tax avoidance and evasion schemes and others without a genuine dispute but seeking to frustrate a legitimate tax recovery process.[146]

The evidence that the small business applicants will be expected to produce is the information within their knowledge or possession, for example, information about the basis of their dispute with the Commissioner, the history of their business, their compliance history, their creditworthiness, and their financial position and the impacts of debt recovery on that financial position, such as being deprived of meaningful review rights if the decision goes into effect. The applicant will be given time to prepare the required information.[147]

Schedule 5: Expanding eligibility for downsizer contributions

Background

From 2018, individuals who were aged 65 or older were permitted to use the proceeds of one sale of their main residence to make contributions (downsizer contributions) of up to $300,000 to their superannuation provider.[148] Downsizer contributions can be made regardless of the other contributions caps and restrictions that might apply to making voluntary contributions.[149] The measure was proposed in the 2017–18 Budget, as part of a ‘Reducing pressure on housing affordability’ package, on the basis that ‘encouraging downsizing may enable more effective use of the housing stock by freeing up larger homes for younger, growing families’.[150]

The Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Act 2022 reduced the age for downsizer contributions from 65 to 60.[151] This measure had been announced  as part of the ‘Flexible Super package’ in the 2021–22 Budget[152] and the Government stated that it:

provides greater flexibility for older Australians to contribute to their superannuation and may encourage individuals to downsize sooner to a home that better suits their needs, thereby freeing up the stock of larger homes for younger families.[153]

The amendment applied in relation to superannuation contributions made on or after 1 July 2022.[154]

Schedule 5 to the Bill proposes to further reduce the age eligibility, from 60 to 55, for downsizer contributions to a superannuation plan from the proceeds of selling a main residence, provided the other existing conditions are met.

This will partially implement the Helping homeowners who want to downsize commitment announced by the Coalition Government on 15 May 2022 during the 2022 Federal election.[155] This policy was then supported by the ALP.[156]

The Explanatory Memorandum states that the rationale for the measure was to

provide greater flexibility for older Australians to contribute to their superannuation and may encourage individuals to downsize sooner to a home that better suits their needs, thereby freeing up the stock of larger homes for younger families.[157]

All other eligibility requirements remain the same.

Impacted population

When costing the Coalition policy, the PBO assumed:

• approximately 5,000 people a year between the ages of 55 and 60 would make downsizer contributions and
• these contributions were being brought forward as the same group would have made them over the age of 60.[158]

Committee consideration

Committee consideration of the current Bill is set out on page 7 of this Digest.

Position of non-government parties/independents/major interest groups

As set out above, the policy implemented by Schedule 5 was an election commitment of the Liberal party. The position of other non-government parties and independents on the measures contained in Schedule 5 could not be determined at the time of writing.

Financial implications

Schedule 5 is estimated to decrease receipts by $20.0 million over the forward estimates.[159]

2021-22 ($m)	2022-23 ($m)	2023-24 ($m)	2024-25 ($m)	2025-26 ($m)
-	..	..	-10.0	-10.0

- Nil

.. Not zero, but rounded to zero.

Parliamentary Budget Office costing

Table A1: Downsizer Contributions – Fiscal and underlying cash balances ($m)

Tax Revenue	2022-23 ($m)	2023-24 ($m)	2024-25 ($m)	2025-26 ($m)
Downsizer Contributions	0	-3.0	-4.0	-6.0

Source: Parliamentary Budget Office, Appendix E – Costing Documentation For The Coalition’s Election Commitments, 2022 Election commitments report, E-43.

Statement of Compatibility with Human Rights

According to the Government, ‘schedule 5 is compatible with human rights because it positively engages the right to society security’.[160]

---

[1].      As set out in the Explanatory Memorandum to the Bill, ‘There is no universally accepted definition of the term ‘sharing economy’. The sharing economy involves two parties entering into an online agreement for one to provide services and/or loan personal assets to the other, for a payment’: Explanatory Memorandum, Treasury Laws Amendment (2022 Measures No. 2) Bill 2022, 18.

[2].      Senate Standing Committee for the Selection of Bills, Report, 3, 2022, 4 August 2022: 3.

[3].     Jaan Murphy, ‘Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022 [and] Income Tax Amendment (Labour Mobility Program) Bill 2022’, Bills Digest, 59, 2021–22, (Canberra: Parliamentary Library, 2022).   

[4].      Josh Frydenberg (Treasurer) and Mathias Cormann (Minister for Finance), Mid-Year Economic and Fiscal Outlook 2019–2020 166.

[5].      According to the Australian Taxation Office (ATO), the term ‘shadow economy’ replaces ‘black economy’ in order to be in line with the OECD definition of unreported or dishonest economic activity. ‘Shadow economy’, ATO.

[6].      Black Economy Taskforce (Taskforce), Black Economy Taskforce: Final Report, report prepared for the Treasury, (Canberra: Treasury, 2017), 12.

[7].      Taskforce, Black Economy Taskforce: Final Report, 5.

[8].      Taskforce, Black Economy Taskforce: Final Report, Recommendation 7.6, 170.

[9].      Taskforce, Black Economy Taskforce: Final Report, 172.

[10].   Australian Government, Tackling the Black Economy: Government Response to the Black Economy Taskforce Final Report, (Canberra: Treasury, 2018), 21.

[11].    Item 19 of Schedule 1 to the Treasury Laws Amendment (2022 Measures No. 2) Bill 2022. 

[12].    Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest, 2, 2022, 18 March 2022, 60.

[13].    Parliamentary Joint Committee on Human Rights (PJCHR), Human rights scrutiny report, 2, 2022, 25 March 2022, 66.

[14].    Explanatory Memorandum, 1.

[15].    Explanatory Memorandum, 1.

[16].    The Statement of Compatibility with Human Rights can be found at pages 45–50 of the Explanatory Memorandum to the current Bill.

[17].    Explanatory Memorandum, paras 1.3-1.4, 8.

[18].    However, this administrative penalty does not apply to certain record-keeping obligations under tax laws, that is Part X of the Fringe Benefits Tax Assessment Act 1986  (record-keeping obligations related to retention of statutory evidentiary documents) and Division 900 of the ITAA 1997 (record-keeping obligations related to keeping and retaining documents required to substantiate certain expenses).

[19].    Treasury, Improving Black Economy Enforcement and Offences, consultation paper, November 2018, 13.

[20].    Treasury, Improving Black Economy Enforcement and Offences, consultation paper, November 2018, 11.

[21].    Josh Frydenberg (Treasurer) and Mathias Cormann (Minister for Finance), Mid-Year Economic and Fiscal Outlook 2019–2020, 166.

[22].    Taskforce, Black Economy Taskforce: Final Report, 72.

[23].    Explanatory Memorandum, 9.

[24].    Explanatory Memorandum, 10.

[25].    TAA, s 384–20.

[26].    TAA, subsection 384–15(1).

[27].    TAA, subsection 384–15(2).

[28].    TAA, para 384–15(1)(b).

[29].    Schedule 1, items 9, 10 and 16; proposed sections 384–12 and 385–15 of the TAA.

[30].    Schedule 1, item 9, proposed section 384–12. The Explanatory Memorandum (paragraphs 1.26–1.28) notes that a tax-records education direction cannot be issued for record-keeping obligations under a taxation law where non-compliance with those obligations is excluded from giving rise to an administrative penalty under section 288–25 in Schedule 1 to the TAA. See footnote 18 for further information.

[31].    Explanatory Memorandum, 12.

[32].    Schedule 1, item 19.

[33].    Schedule 1, item 19(2).

[34].    Explanatory Memorandum, para 1.45.

[35].    Proposed subsections 384–15(1) and (3).

[36].    TAA, s 384-25.

[37].    S Jones (Assistant Treasurer and Minister for Financial Services), Second reading speech: Treasury Laws Amendment (2022 Measures No. 2) Bill 2022, House of Representatives, Debates, 3 August 2022, 14.  

[38].    Schedule 1, items 1 and 2.

[39].    Proposed section 384–15, note 2 to subsection (3).

[40].    ‘The shadow economy explained’, ATO.

[41].    Explanatory Memorandum, 18.

[42].    Explanatory Memorandum, para 2.5, 18.

[43].    Explanatory Memorandum, paras 2.5 and 2.6, 18. Please also refer to Chapters 1 and 6 discussions of the Black Economy Taskforce Final Report.

[44].    Organisation for Economic Co-operation and Development (OECD), ‘Shining Light on the Shadow Economy: Opportunities and Threats’, Report, 2017, (OECD, 2017), 19.

[45].    OECD, ‘Tax and Digitalisation’, OECD Going Digital Policy Note, 2018 (Paris: OECD, 2018).

[46].    OECD, ‘Tax and Digitalisation’, 6.

[47].    Exposure Draft Explanatory Materials, Treasury Laws Amendment (Black Economy Taskforce Measures No.2) 2018, para 1.3, 7.

[48].    Department of Treasury, A sharing economy reporting regime, consultation paper, January 2019, 4.

[49].    The ATO advised that by June 2021, the following Final Report recommendations have been implemented:

•   removing tax deductibility of non-compliant payments
•   expanding the Taxable Payments Reporting System into new industries
•   increasing the integrity of the Commonwealth procurement process
•   collecting tobacco duties and taxes at the Australian border
•   establishing the cross-agency Black Economy Standing Taskforce
•   establishing the new Tax Integrity Centre (making it easier to make a tip-off) – a single point of contact to report suspected or known illegal activity or behaviour of concern.

[50].    Explanatory Memorandum, ‘Attachment 1: Extracts from the Final Report of the Taskforce’, 51–68.

[51].    Tackling the Black Economy: Government response to the Black Economy Taskforce Final Report, Australian Government, 18.

[52].    ‘Implementing a reporting regime for sharing economy platform providers’, Treasury.

[53].    Treasury, 2019-20 Mid-Year Economic and Fiscal Outlook, 167.

[54].    Treasury, Introducing a Sharing Economy Reporting Regime – Fact Sheet for Exposure Draft Legislation, Fact Sheet, (Canberra: Treasury, June 2021), 1.

[55].    Schedule 2, item 2.

[56].    The information in this section of the Digest, except for the ‘Examples’, is provided by the Treasury’s Fact Sheet (June 2021) for the previous lapsed bill.

[57].    Treasury, Introducing a Sharing Economy Reporting Regime – Fact Sheet for Exposure Draft Legislation, 1.

[58].    Schedule 2, item 1; Treasury, Introducing a Sharing Economy Reporting Regime – Fact Sheet for Exposure Draft Legislation, 1.

[59].    Treasury, Introducing a Sharing Economy Reporting Regime – Fact Sheet for Exposure Draft Legislation, 2.

[60].    Treasury, Introducing a Sharing Economy Reporting Regime – Fact Sheet for Exposure Draft Legislation, 2.

[61].    Explanatory Memorandum, para 2.12, 19.

[62].    Australian Taxation Office, ATO privacy policy website.

[63].    Explanatory Memorandum, 2.

[64].    ‘Australian Privacy Principles’, Office of the Australian Information Commissioner (OAIC);  ‘Australian Government Agencies Privacy Code’, OAIC.

[65].    OECD, ‘Tax and Digitalisation’, OECD Going Digital Policy Note, 2018 (Paris: OECD, 2018) 6.

[66].    ‘[202151] Sharing Economy Reporting Regime,’ Australian Taxation Office.

[67].    Treasury, A sharing economy reporting regime, consultation paper, January 2019, 7.

[68].    The submitters that supported a new reporting regime for a sharing economy include: Airbnb, Submission, 27 March 2019 [2]; AUSTRAC, Submission, February 2019, 2; Australian Council of Trade Unions (ACTU), Submission, March 2019, 13; Australian Payment Network, Submission, 21 February 2019, [3]; Chartered Accountants Australia and New Zealand (CAANZ), Submission, 12 March 2019, 3; CPA Australia, Submission, 14 March 2019, 2; Deliveroo, Submission, February 2019, 1; Institute of Public Accountants, Submission, February 2019, 3; KPMG, Submission, 22 February 2019, 1; PriceWaterhouseCoopers (PWC), Submission, 1 March 2019, 8; The Tax Institute, Submission, 25 February 2019, 2–3; Tourism Accommodation Australia, Submission, February 2019, 7; and The University of Sydney Law School, Submission, 21 February 2019, [2].

[69].    Treasury, A sharing economy reporting regime, consultation paper, January 2019, 8.

[70].    For example, see submissions from the ACTU, 15, Australian Small Business and Family Enterprise Ombudsman, [1], Maurice Blackburn Lawyers, 2–3,  the Transport Workers’ Union of Australia, Unions NSW, United Voice and the University of Sydney Law School, 2–3. 

[71].    HIA, Submission, 22 February 2019, 1.

[72].    HIA, Submission, 22 February 2019, 1.

[73].    Queensland Law Society, Submission, 14 March 2019, 2.

[74].    Self Employed Australia, Submission, February 2019, 4.

[75].    Senate Standing Committee for Selection of Bills, Report, 10, 2021, 26 August 2021: 3.

[76].    Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest, 14, 2021, 1 September 2021: 13.

[77].    Parliamentary Joint Committee on Human Rights, Human Rights Scrutiny Report, 11, 2021, 16 September 2021: 61..

[78].    The Senate Economics Legislation Committee (SELC), Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], October 2021: 15–16.

[79].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], para 2.19.

[80].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], 11–16.

[81].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], 11.

[82].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], 15.

[83].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], 11 and 15.

[84].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], para 2.7.

[85].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], para 2.8–2.9.

[86].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], para 2.10.

[87].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], para 2.11.

[88].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], para 2.12.

[89].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], paras 2.13–2.14.

[90].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], paras 2.15–2.16.

[91].    SELC, Treasury Laws Amendment (2021 Measures No.7) Bill 2021 [Provisions], paras 2.17.

[92].    Explanatory Memorandum, Treasury Laws Amendment (2022 Measures No. 2) Bill 2022, 2.

[93].    Explanatory Memorandum, Treasury Laws Amendment (2022 Measures No. 2) Bill 2022, 2.

[94].    Explanatory Memorandum, Treasury Laws Amendment (2022 Measures No. 2) Bill 2022, 3.

[95].    PM&C, Australian Government Regulation Impact Statement Status (2021–22), 26.

[96].    Explanatory Memorandum, Treasury Laws Amendment (2022 Measures No. 2) Bill 2022, para 6.5, 46.

[97].    Explanatory Memorandum, Treasury Laws Amendment (2022 Measures No. 2) Bill 2022, para 6.12, 47.

[98].    Treasury, A sharing economy reporting regime, consultation paper, January 2019, 8.

[99].    Subsection 396-55(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA).

[100].  Subsection 396-60(1) of Schedule 1 to the TAA.

[101].  Proposed item 15 of the Table at section 396-55 of Schedule 1 to the TAA, paragraph (d) in Column 2, item 2 of Schedule 2 to the Bill.

[102].  Proposed item 15 of the Table at section 396-55 of Schedule 1 to the TAA, paragraph (c) in Column 2, item 2 of Schedule 2 to the Bill.

[103].  Proposed item 15 of the Table at section 396-55 of Schedule 1 to the TAA, paragraph (b) in Column 2, item 2 of Schedule 2 to the Bill.

[104].  Income Tax Assessment Act 1936 (ITAA 1936), subsection 82A(1).

[105].  The $250 threshold was introduced in 1975 alongside a concessional tax rebate of $250 for expenditure on self-education. The threshold was set to ensure only education expenses above the $250 tax rebate could qualify for a deduction. The threshold prevented taxpayers from double-claiming $250 as a rebate and deduction at the same time. However, after the concessional rebate was repealed in 1985, the $250 threshold no longer has a purpose: Explanatory Memorandum, 27. Many have called for its repeal though recent years. See links for examples: ‘Repeal s82A ITAA36’, Board of Taxation; ‘Work-related Self-Education Expenses, Tax Talks.

[106].  Australian Taxation Office, Education and Study – Specific Self-Education Expenses. The ATO provides further examples of  non-deductible education expenses, including a computer or desk (for example, capital costs of items) acquired and used for self-education purposes, travel expenses for the last stage of travel from home to place of education and then to workplace. Please refer to Category E expenses mentioned in ATO website. See also ‘Taxation Ruling: TR98/9’, Australian Taxation Office.

[107].  Fringe Benefits Tax Assessment Act 1986, paragraphs 24(1)(ba), 37(b), 37(c), 44(1)(ba), 52(1)(b) and 52(1)(ba); see also Australian Taxation Office, ‘Fringe benefits tax - a guide for employers’, 117–118.

[108].  Australian Government, ‘Part 1: Receipt Measures - Reducing Compliance Costs For Individuals Claiming Self-education Expense Deductions’, Budget Measures: Budget Paper No.2: 2021-22, 26.

[109].  As explained in the Explanatory Memorandum (paras 3.21-3.24), the general deduction provision is section 8-1 of the Income Tax Assessment Act 1997.

[110].  Items 1 to 17 of Schedule 3 to the Bill.

[111].  Item 33 of Schedule 3 to the Bill.

[112].  Explanatory Memorandum, paras 3.3-3.6, 26.

[113].  Treasury, Education and Training Expense Deductions for Individuals: Discussion Paper, (Canberra: Treasury: 2020).

[114].  Explanatory Memorandum, paragraph 3.5, 26.

[115].  Australian Government, ‘Part 1: Receipt Measures - Reducing Compliance Costs For Individuals Claiming Self-education Expense Deductions’, Budget Measures: Budget Paper No.2: 2021-22, 26.

[116].  SELC, Treasury Laws Amendment (2021 Measures No. 7) Bill 2021 [Provisions], paras 2.18 – 2.21, 15–16.

[117].  Explanatory Memorandum, 4.

[118].  Explanatory Memorandum, 4.

[119].  The Statement of Compatibility with Human Rights can be found at page 48 (para 6.17) of the Explanatory Memorandum to the Bill.

[120].  Section 82A of the Income Tax Assessment Act 1936.

[121].  Explanatory Memorandum, footnote 1, 32.

[122].  Australian Government, ‘Part 1: Receipt Measures’, Budget Measures: Budget Paper No.2: 2021–22, 19–20.

[123].  S Jones (Assistant Treasurer and Minister for Financial Services), Second reading speech: Treasury Laws Amendment (2022 Measures No. 2) Bill 2022, House of Representatives, Debates, 3 August 2022, 14.   .

[124].  Jones, Second reading speech: Treasury Laws Amendment (2022 Measures No. 2) Bill 2022, 14.  

[125].  ‘Eligibility’, Australian Taxation Office.

[126].  Treasury, Extend the Power of the AAT to Pause or Modify ATO Debt Recovery Action, Exposure Draft Legislation, 12 January 2022–19 January 2022.

[127].  Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest, 2, 2022, 18 March 2022: 56. Note, the committee did comment on certain schedules of the lapsed Bill, but they are irrelevant to the current Bill. 

[128].  PJCHR, Human rights scrutiny report, 2, 2022, 25 March 2022, 66.

[129].  Explanatory Memorandum, 4.

[130].  Explanatory Memorandum, 4.

[131].  The Statement of Compatibility with Human Rights can be found at page 48–49 of the Explanatory Memorandum to the Bill.

[132].  Explanatory Memorandum, para 4.13, 33.

[133].  Explanatory Memorandum, para 4.19, 34.

[134].  Section 255-1 of Schedule 1 to the Taxation Administration Act 1953 defines a ‘tax related liability’.

[135].  Section 2 of the TAA and section 995-1 of the Income Tax Assessment Act 1997 provide the meaning of ‘taxation law’.

[136].  Deutsch et al, Australian Tax Handbook 2022 (Sydney: Thomson Reuters, 2022), 1698. For a full list of the different types of tax-related liabilities that arise throughout the various taxation laws, please refer to the 2 tables in section 250-10 of Schedule 1 to the TAA.

[137].  TAA, Schedule 1, section 255–(1).

[138].  Wolters Kluwer, Australian Master Tax Guide (Sydney: CCH Australia, 2022), 1357.

[139].  TAA, Schedule 1, sub-section 255–5(2).

[140].  TAA, Schedule 1, subsection 14ZZB(1); ATO, Taxation Determination TD 93/226:Income tax: does the Administrative Appeals Tribunal (Tribunal) have the power to stay any recovery proceedings for amounts owing on an assessment whilst that assessment is subject to review by the Tribunal?

[141].  TAA, sections 14ZZM and 14ZZR.

[142].  Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41. Please also refer to Wolters Kluwer, Australian Master Tax Guide (Sydney: CCH Australia, 2022), 1358.

[143].  TAA, section 14ZZB; Coshott and Commissioner of Taxation [2013] AATA 822; Wolters Kluwer, Australian Master Tax Guide (Sydney: CCH Australia, 2022), 1358.

[144].  Proposed subsection 14ZZB(3) of the TAA, at item 2 of Schedule 4 to the Bill; Wolters Kluwer, Australian Master Tax Guide (Sydney: CCH Australia, 2022), 1358.

[145].  Proposed paragraph 14ZZH(3A)(b) of the TAA, at item 3 of Schedule 4 to the Bill. See Explanatory Memorandum, paras 4.25-4.28, 36-37.

[146].  Explanatory Memorandum, paras 4.28, 37.

[147].  Explanatory Memorandum, para 4.21, 34–35.

[148].  Item 4 of Schedule 2 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Act 2017 inserted section 292-102 into the Income Tax Assessment Act 1997.

[149].  Explanatory Memorandum, Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Bill 2017, 3. 

[150].  Australian Government, ‘Part 1: Revenue Measures’, Budget Measures: Budget Paper No. 2: 2017–18, 28 .

[151].  Item 1 of Schedule 3 to the Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Act 2022. For more information see Adrian Makeham-Kirchner, ‘Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021’, Bills Digest, 38, 2021–22, (Canberra: Parliamentary Library, 2021). 

[152].  Australian Government, ‘Part 1: Receipt Measures’, Budget Measures: Budget Paper No. 2: 2021–22, 18 .

[153].  Explanatory Memorandum, Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021, 13.

[154].  Item 2 of Schedule 3 to the Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Act 2022.

[155].  Liberal Party of Australia, Our Plan for Housing and Home Ownership, Coalition policy document, Election 2022, 4; Liberal Party of Australia, Supporting Senior Australians: Helping Homeowners Who Want to Downsize, Coalition policy document, Election 2022.

[156].  ‘Interview with Anthony Albanese’, ABC Insiders, transcript, Australian Broadcasting Corporation (ABC), 15 May 2022, 3.

[157].  Explanatory Memorandum, para 5.6, 41-42.

[158].  Parliamentary Budget Office, Appendix E – Costing Documentation For The Coalition’s Election Commitments, 2022 Election Commitments Report, E–39 to E–41.

[159].  Explanatory Memorandum, 6.

[160].  The Statement of Compatibility with Human Rights can be found at pages 5 and 50 of the Explanatory Memorandum to the Bill.

 

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