Chapter 1

Introduction

1.1        On 14 February 2019, the Senate referred the provisions of the Treasury Laws Amendment (2019 Measures No. 1) Bill 2019 (TLA Bill) and the Excise Tariff Amendment (Supporting Craft Brewers) Bill 2019 (Excise Tariff Bill) to the Economics Legislation Committee (the committee) for inquiry and report by
26 March 2019.[1]

Conduct of the inquiry

1.2        The committee advertised the inquiry on its website and wrote to relevant stakeholders and interested parties inviting written submissions. The committee received one submission, which is listed at Appendix 1.

1.3        The committee thanks all stakeholders who assisted with the inquiry.

Overview of the bills

1.4        The TLA Bill contains four schedules. The Excise Tariff Bill contains one schedule which is intended to operate in conjunction with the amendments made by Schedule 2 to the TLA Bill.

1.5        For the remainder of this Chapter, references to 'the bill' relate to amendments proposed in the TLA Bill, whereas references to 'the bills' relate to amendments proposed in the Excise Tariff Bill in conjunction with those in Schedule 2 of the
TLA Bill.

Self managed superannuation fund membership limit (TLA Bill—Schedule 1)

1.6        The primary definition of a 'self managed superannuation fund' (SMSF) is set out under section 17A of the Superannuation Industry (Supervision) Act 1993 (SIS Act). Under this definition, SMSFs are required to have 'fewer than five members'. As such, the maximum number of allowable members in SMSFs is currently four members.[2]

1.7        The SIS Act also contains provisions dealing with small superannuation funds, including some provisions that are limited to small funds that are not SMSFs. Small funds that are not SMSFs are regulated by the Australian Prudential Regulation Authority (APRA) and are generally referred to as 'small APRA funds'. The threshold for small APRA funds is set at the same level as the member limit for SMSFs; that is, fewer than five members.[3]

1.8        As outlined in the Explanatory Memorandum (EM), provisions in income tax and superannuation laws that apply to SMSFs refer directly to the 'self managed superannuation fund' definition set out in the SIS Act. Provisions that apply to small APRA funds generally mirror the approach taken in the SIS Act by referring to funds that have fewer than five members and that are not SMSFs.[4]

1.9        Schedule 1 (Parts 1 and 2) to the bill seeks to amend the SIS Act, Income Tax Assessment Act 1997 and Superannuation (Unclaimed Money and Lost Members) Act 1999 to increase the maximum number of allowable members in SMSFs from four to six (that is, fewer than seven members). To ensure continued alignment with the increased maximum number of members for SMSFs, Schedule 1 also amends provisions in the above Acts that relate to SMSFs and small APRA funds.[5]

1.10      Presently, where an SMSF has more than one director member, its accounts and statements for each income year must be signed by at least two members in their capacity as an individual trustee or as a director of a corporate trustee.[6] For SMSFs with three or four members, this requirement means that, under the current definition of a 'self managed superannuation fund', at least half of the SMSFs members must sign its accounts.[7]

1.11      To ensure that these requirements continue to apply correctly following the increase to the maximum number of allowable members in SMSFs from four to six, Schedule 1 also seeks to amend the sign off requirements under the SIS Act relating to the accounts and statements that must be prepared by the trustees of an SMSF each income year. Under the updated requirements, for SMSFs with between three and six directors or trustees, at least half of the members must sign its accounts and statements for an income year.[8]

1.12      By allowing groups of five or six people to establish an SMSF, Schedule 1 is aimed at supporting greater consumer choice and underpins the government's plan for ensuring all Australians get a fair go, especially in retirement. As the Assistant Treasurer, the Hon. Stuart Robert MP, explained in his second reading speech:

Self-managed superannuation funds are often used by families as a vehicle for managing their own superannuation savings and investment strategies. For families with more than four members, currently the only real options are to create two self-managed superannuation funds (which would incur extra costs) or place their superannuation in a large fund. This limits their choice and flexibility.[9]

Contingent amendments

1.13      The EM notes that several bills currently before the Parliament also contain amendments that introduce or amend provisions that refer to small superannuation funds.[10] Schedule 1 (Part 3) to the bill includes amendments that are contingent upon the passage of those other Bills.

1.14      These bills currently before the Parliament include the:

• Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017;
• Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2018; and
• Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018.

1.15      The amendments in Schedule 1 (Part 3) seek to ensure continued alignment between the increased member threshold in the definition of a 'self managed superannuation fund' and the proposed provisions in the above bills.[11]

Commencement

1.16      Schedule 1 (Parts 1 and 2) commence on the later of:

• 1 July 2019; and
• The first 1 January, 1 April, 1 July or 1 October to occur after the day amendments receive Royal Assent.[12]

1.17      The contingent amendments in Schedule 1 (Part 3) commence immediately after the later of the time that Parts 1 and 2 in Schedule 1 to the bill commence and the time that the relevant schedule in the other bill commences. However, each of the contingent amendments do not commence at all if the relevant schedule to the other bill does not commence.[13]

Extending support for craft brewers (TLA Bill—Schedule 2 and Excise Tariff Bill—Schedule 1)

1.18      Excise duty applies to beer that is manufactured in Australia and is payable at the time of entry for home consumption. Concessional excise duty rates currently apply to draught beer entered for home consumption in containers (typically kegs) with a capacity of greater than 48 litres. Given the size of containers presently required to qualify for the concession, this concessional duty rate normally only applies to draught beer dispensed for sale from commercial premises.[14]

1.19      Further, any beer that is entered for home consumption in individual containers exceeding 48 litres and that is subsequently repackaged into containers with a smaller capacity, is considered to have been subject to further manufacturing and is therefore currently subject to non-concessional rates of excise duty.[15]

1.20      Schedule 2 to the TLA Bill and Schedule 1 of the Excise Tariff Bill (hereafter referred to as 'the bills') seek to amend the Excise Act 1901 (Excise Act) and the Excise Tariff Act 1921 (Excise Tariff Act) to extend concessional excise duty rates to brewers that supply draught beer in kegs or other containers that have a capacity of
8 litres or greater.[16]

1.21      The Assistant Treasurer outlined how the measure will support craft brewers:

Extending the concessional draught beer excise rates to kegs of eight litres or more will support craft brewers, which prefer to distribute beer from smaller kegs. This measure levels the playing field between small and large breweries.[17]

1.22      Under the proposed amendments, the concessional excise duty rates apply to draught beer packaged in containers if the containers:

• are designed to be connected to a pressurised gas delivery system, pump delivery system or other system prescribed by regulations; and
• have a capacity of between 8 litres and 48 litres (inclusive).[18]

1.23      The EM notes that the requirement that the containers must be designed to connect to a pressurised gas or pump delivery system is an integrity rule to ensure that concessional duty rates do not apply to containers primarily targeted for sale to consumers for personal consumption. This integrity rule also seeks to ensure that the support provided by this measure is targeted for the draught beer produced by craft brewers in containers purpose built for dispensing at licenced commercial premises.[19]

1.24      To ensure that a similar integrity rule applies to repackaged beer, the bills also propose consequential amendments to the Excise Act. Under the proposed amendments, non-concessional excise duty rates apply to the repackaging of beer into individual containers:

• of less than 8 litres; or
• of at least 8 litres but not exceeding 48 litres and not designed to be connected to a pressurised gas delivery system, pump delivery system or other system prescribed by regulations.[20]

Commencement

1.25      The amendments to the Excise Act and Excise Tariff Act proposed by the bills apply to goods entered for home consumption on or after 1 July 2019.[21]

Global Infrastructure Hub Ltd (TLA Bill—Schedule 3)

1.26      The Global Infrastructure Hub Ltd (the Hub) was established by G20 Leaders at the 2014 Brisbane Summit. It was initially given a four-year mandate to December 2018 to advance international efforts to lift infrastructure investment.[22]

1.27      The Hub is funded by contributions from the Australian Government and other G20 members. To avoid these funding contributions being subject to income tax, the Hub was granted tax exempt status under Division 50 of the ITAA 1997. This exemption will expire on 1 July 2019.[23]

1.28      In July 2018, the G20 Finance Ministers agreed to extend the mandate of the Hub for an additional four years to December 2022.[24]

1.29      Schedule 3 to the bill amends Division 50 of ITAA 1997 to extend the Hub's listing as an income tax exempt entity until 30 June 2023.[25]

Commencement

1.30      The amendments in Schedule 3 apply from the first 1 January, 1 April, 1 July or 1 October after the bill receives Royal Assent.[26]

Miscellaneous amendments (TLA Bill—Schedule 4)

1.31      Schedule 4 to the bill seeks to make a number of miscellaneous amendments to legislation in the Treasury portfolio. As summarised in the EM, these amendments make minor technical changes to correct spelling errors, bring provisions in line with drafting conventions and repeal inoperative provisions. The schedule also makes minor technical amendments to remove administrative inefficiencies and clarifies the law to ensure that it operates in accordance with policy intent.[27]

1.32      Progression of such amendments is intended to give priority to the care and maintenance of legislation in the Treasury Portfolio. The Assistant Treasurer elaborated on this point in his second reading speech, noting that:

By clarifying the laws and repealing unnecessary provisions, these amendments also reduce the regulatory burden and make it easier for Australians to access current laws.[28]

Commencement

1.33      Schedule 4 contains four Parts, with the amendments under each Part commencing as follows:

• Part 1—Amendments commencing on the day after Royal Assent;
• Part 2—Amendments commencing on the first 1 January, 1 April, 1 July or
  1 October to occur after Royal Assent;
• Part 3—Amendments commencing 28 days after Royal Assent; and
• Part 4—Amendments commencing on 1 January 2019.[29]

Financial impact

1.34      The EM states that the amendments in Schedules 1 and 3 of the TLA Bill are estimated to have no revenue impact; and the amendments in Schedule 4 a negligible financial impact, over the forward estimates period.[30]

1.35      As at the 2018–19 Budget, the Alcohol Taxation—extending support for craft brewers and distillers measure is estimated to have a cost to revenue of $85 million over the forward estimates period.[31]

Table 1: Financial impact of the 2018–19 Budget measure Alcohol Taxation—extending support for craft brewers and distillers[32]

2017–18	2018–19	2019–20	2020–21	2021–22
-	-	-$25m	-$30m	-$30m

Compatibility with Human Rights

1.36      As required under the Human Rights (Parliamentary Scrutiny) Act 2011, the government has assessed the bills' 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 bills are compatible.[33]

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