Andrew Leigh

Second Reading Speech
House of Representatives
22 March 2023
Treasury Laws Amendment (Refining and Improving our Tax System) Bill 2023

The Treasury Laws Amendment (Refining and Improving our Tax System) Bill 2023 contains a number of measures to remove unnecessary administrative and compliance burdens associated with our tax system.

Schedule 1 to the bill amends the International Tax Agreements Act 1953 to give the force of law to the new tax treaty signed by Australia and Iceland on 12 October 2022.

The number of Icelandic people in Australia is not large. The 2021 census counted 405 Icelandic-born people and 1,328 people of Icelandic ancestry. However, Iceland's GDP per capita is one of the highest in the world and this tax treaty will make Australia a more attractive investment destination for Icelandic capital. It will also reduce the tax barriers to Australian businesses trading with Iceland.

The treaty also reflects the government's commitment to ensuring multinationals pay their fair share of tax.

As part of our first budget last October, we've already taken meaningful steps:

• We are making it harder for multinationals to shift profits by charging themselves for intangibles that happen to be based in countries with low tax rates;
• We are strengthening Australia's thin capitalisation rules to reduce the amount multinationals can deduct from their tax bill as debt;
• We are increasing reporting requirements for large multinationals to enhance tax transparency; and
• Recognising that a well-equipped public service pays off in the long run, we are investing over $1 billion to strengthen the Australian Taxation Office's Tax Avoidance Taskforce.

This treaty builds on that work by incorporating important integrity measures from the G20 and OECD's Base Erosion and Profit Shifting project and providing mechanisms to support stronger cooperation between tax authorities to detect and combat tax evasion.

This treaty presents a welcome opportunity to strengthen our economic and cultural ties with Iceland, a country with which we share many values.

Schedule 2 to the bill amends the law to exempt wholly owned Australian incorporated subsidiaries of the Future Fund Board of Guardians, which I will refer to as the Future Fund Board, from corporate income taxation.

Currently, the Future Fund Board is exempt from income taxes, but this exemption does not extend to its wholly owned subsidiaries. Extending this exemption will remove the administrative burden associated with the payment of tax by these subsidiaries and the subsequent claiming of a refund by the Future Fund Board.

The legislation will not change the net position for either the Commonwealth or the Future Fund—that is, no income tax is collected by the Commonwealth from the Future Fund Board.

Schedule 3 of the bill transfers administration of four unique deductible gift recipient categories to the Australian Taxation Office, and repeals provisions relating to the maintenance of departmental registers.

The Australian Taxation Office currently administers 48 of the 52 categories under which an organisation may be eligible for endorsement as a deductible gift recipient. Four deductible gift recipient categories—environmental organisations, harm prevention charities, cultural organisations, and overseas aid organisations—are currently administered by ministers through departmental registers.

The amendments transfer practical responsibility for assessing deductible gift recipients from these four ministers to the Australian Taxation Office. The amendments will make all deductible gift recipient categories consistent in administration, reducing the regulatory burden imposed on endorsed organisations and streamlining application and reporting requirements for organisations.

Approval times for these four categories will be reduced from up to two years to around one month. It will prevent the situation we saw prior to the last election, in which worthy charities that were not politically aligned with the Morrison government did not receive their deductible gift recipient listing in a timely fashion. This included the Grace Tame Foundation, which had to await the election of the Albanese government before receiving its deductible gift recipient listing.

These changes are just part of our commitment to strengthening the charity sector.

• We have ended the war on charities, and the needless attacks on charities that engage in charitable advocacy;
• We have completed the largest consultation of non-government organisations and charities in Australia's history;
• We have launched a once-in-a-generation Productivity Commission review of philanthropy—aiming to double giving by 2030;
• We have secured an in-principle agreement with the states and territories to harmonise charitable fundraising laws; and
• We have appointed the highly respected Sue Woodward to head the Australian Charities and Not-for-profits Commission.

Schedule 4 to the bill provides deregulatory benefits to small and medium businesses that engage with the fuel or alcohol excise system or import excise-equivalent goods. Instead of the existing ability to apply for weekly or monthly reporting and payments, such businesses can also apply for permission to lodge and pay their duty quarterly. This measure will reduce administrative burdens and help small and medium businesses with cash flow.

The proposed amendment will commence on 1 July 2023. Eligible businesses with an aggregated turnover of less than $50 million in an income year, who pay fuel and alcohol excise or customs duty on excise-equivalent goods, will then be able to apply for permission to the Commissioner of Taxation or Comptroller-General of Customs to move to the new reporting schedule.

Currently, businesses are required to lodge and pay excise and customs duty on excise-equivalent goods when goods enter home consumption unless they have permission to defer lodgement and payment. This permission can only be given for lodgement and payment weekly or, for certain eligible businesses, monthly.

This new quarterly schedule will better align fuel and alcohol excise and customs duty on excise-equivalent goods with other indirect taxes such as the goods and services tax. Fuel and alcohol businesses will benefit from reporting and paying excise and customs duty at the same time as they lodge their business activity statement.

Schedule 5 to the bill provides deregulatory benefits to retail and hospitality venues who repackage beer from bulk quantities into small containers for immediate retail sale. From 1 July 2023, this measure introduces a targeted exemption from alcohol excise licensing requirements for the repackaging of the first 10,000 litres of beer from kegs into non-pressurised containers of no more than two litres capacity—commonly known as growlers—for immediate retail sale at particular premises in a financial year.

Currently, businesses that package duty-paid beer into these containers are required to hold a manufacturing licence for excise purposes and pay duty again, in effect paying double duty. These licences carry significant obligations which are more appropriate to entities fermenting, brewing or repackaging beer on a commercial basis in order to protect the lower alcohol excise rate of keg beer. However, filling specified containers in retail settings does not pose this integrity risk. This measure will benefit the hospitality sector, and reflects the Australian government's commitment to our local bars and clubs.

While the first 10,000 litres of beer in a financial year is exempt, subsequent amounts are captured by existing arrangements. This will ensure that larger businesses engaged in this practice in more significant commercial quantities remain appropriately regulated.

Sale of takeaway alcohol in retail settings will continue to remain the regulatory responsibility of the states and territories. This amendment is intended to remove disproportionate regulatory requirements on this practice created by the alcohol excise system.

The measures in schedules 4 and 5 reflect the Australian government's strong commitment to a thriving small business sector. It complements small business measures that we are already implementing, including:

• Strengthening protections for small businesses from unfair contract terms;
• Making it easier for small businesses to access government procurement contracts;
• Funding an energy savings grant program for small businesses, helping them reduce energy use and lower energy bills;
• Providing more than $15 million to support small business owners with free mental health support and financial counselling; and
• Improving payment times for small businesses.

Full details of the measure are contained in the explanatory memorandum.

The DEPUTY SPEAKER (Dr Freelander):

I thank the minister. Does it mean we get more Icelandic crime fiction here?

Dr Leigh:

It could well do!