House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer, the Hon Stuart Robert MP)

Glossary

The following abbreviations and acronyms are used throughout this explanatory memorandum.

General outline and financial impact

AMIT technical amendments

Schedule 1 to this Bill amends the TAA 1953, ITAA 1997, ITAA 1936, TLAA 2016 and the IT(TP)A 1997 to make a number of technical refinements to the income tax law so that the new tax system for MITs operates as intended.

Date of effect: The amendments generally apply in relation to the 2018-19 income year and later income years.

Proposal announced: The amendments were announced by the then Minister for Revenue and Financial Services on 19 July 2017.

Financial impact: This legislation contains technical amendments reflecting the policy intent of the 2015-16 MYEFO measure Managed investment trusts - adjustments to the new tax system. This measure was estimated to have an unquantifiable cost to revenue.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 5, paragraphs 5.1 to 5.4.

Compliance cost impact: Minimal.

Deductible gift recipients

Schedule 2 to this Bill amends the ITAA 1997 to update the list of specifically listed DGRs to include:

•

Australian Sports Foundation Charitable Fund;

•

Australian Women Donors Network;

•

Paul Ramsay Foundation Limited;

•

The Q Foundation Trust;

•

Smile Like Drake Foundation Limited; and

•

Victorian Pride Centre Ltd.

Date of effect: The amendments apply to gifts made to Australian Sports Foundation Charitable Fund after 30 June 2018 and before 1 July 2023.

The amendments apply to gifts made to Australian Women Donors Network, Smile Like Drake Foundation Limited and Victorian Pride Centre Ltd after 8 March 2018 and before 9 March 2023.

The amendments apply to gifts made to Paul Ramsay Foundation Limited after 30 June 2018 and before 1 July 2020.

The amendments apply to gifts made to The Q Foundation Trust after 31 December 2017 and before 1 January 2023.

Proposal announced: This Schedule fully implements the measure 'Philanthropy - updates to the list of specifically listed deductible gift recipients' from the 2018-19 Budget.

Financial impact: As at the 2018-19 Budget, the cost to revenue of this measure was estimated to be $0.6m over the forward estimates period to 2021-22, comprising ($m):

- Nil

..Not zero but rounded to zero

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 5, paragraphs 5.5 to 5.8.

Compliance cost impact: Nil.

Extending DGR status to entities promoting Indigenous languages

Schedule 3 to this Bill provides that entities that promote Indigenous languages may be endorsed as a DGR.

Date of effect: The amendments contained in Schedule 3 commence from 1 July 2019.

Proposal announced: This Schedule implements the measure 'Extending deductible gift recipient eligibility to organisations promoting Indigenous languages' which was announced in the 2017-18 MYEFO.

Financial impact: As at the 2017-18 MYEFO, this measure was estimated to have a negligible cost to revenue over the then forward estimates period comprising:

- zero

.. not zero but rounded to zero

Human rights implications: Schedule 3 does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 5, paragraphs 5.9 to 5.15.

Compliance cost impact: Nil.

Repeal of subsection 51(3) of the Competition and Consumer Act 2010

Schedule 4 repeals subsection 51(3) of the Competition and Consumer Act 2010 (CCA) and subsection 51(3) of Schedule 1 to the CCA (the Competition Code). The amendments remove the exemption for conditional licensing or assignment of IP rights such as patents, registered designs, copyright or eligible circuit layout rights from prohibitions on restrictive trade practices.

Date of effect: The day after the end of the period of six months beginning on the day this Bill receives the Royal Assent.

Proposal announced: This measure implements the Government's response to recommendation 15.1 of the Productivity Commission's Intellectual Property Arrangements Inquiry Report (December 2016) (the Report). The Government's response was released on 25 August 2017 and is available on the Department of Industry, Innovation and Science website.

Financial impact: Nil.

Human rights implications: This Schedule is compatible with human rights, and to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate. See Statement of Compatibility with Human Rights - Chapter 5, paragraphs 5.16 to 5.31.

Compliance cost impact: Expected to be low.

The Productivity Commission's Report was certified by the Office of Best Practice Regulation as a Regulatory Impact Statement-like process: OBPR ID number 21654.

Chapter 1 AMIT technical amendments

Outline of chapter

1.1 Schedule 1 to this Bill amends the TAA 1953, ITAA 1997, ITAA 1936, TLAA 2016 and the IT(TP)A 1997 to make a number of technical refinements to the income tax law so that the new tax system for MITS operates as intended.

1.2 All legislative references in this Chapter are to the ITAA 1997 unless otherwise indicated.

Context of amendments

1.3 In 2016, the new tax system for AMITs (the AMIT regime) was enacted following recommendations made by the Board of Taxation in its Report on the Review of the Tax Arrangements Applying to Managed Investment Trusts. The new tax system was designed to increase certainty, allow greater flexibility and reduce compliance costs for MITs and enhance the competitiveness of Australia's funds management industry.

1.4 The AMIT regime applies to certain MITs if the members of the MIT have clearly defined interests in relation to the income and capital of the trust and the trustee of the MIT makes a choice to apply the new tax system. MITs that choose to apply the new tax system are referred to as AMITs.

1.5 The AMIT regime has a number of benefits which include:

•

fixed trust treatment for income tax purposes;

•

an attribution regime which allows the AMIT to attribute amounts of assessable income, exempt income, non-assessable non-exempt income and tax offsets to members on a fair and reasonable basis for income tax purposes; and

•

an 'unders and overs' regime which allows the AMIT to reconcile variances between the amounts actually attributed to members for an income year, and the amounts that should have been attributed, in the income year that it is discovered.

1.6 In addition, the AMIT regime:

•

allows for annual upward and downward adjustments to the CGT cost bases of membership interests in an AMIT; and

•

ensures a withholding tax obligation arises when an AMIT attributes a fund payment or DIR payment to a member who is a foreign resident (rather than only when an amount is paid).

1.7 Some practical issues have been identified with the operation of the AMIT regime since its enactment in 2016.

1.8 Consequently on 19 July 2017, the then Minister for Revenue and Financial Services announced this package of technical amendments. Most of these changes have been sought by the funds management industry and are consistent with current industry practice.

Summary of new law

1.9 Schedule 1 to this Bill amends the TAA 1953, ITAA 1997, ITAA 1936, TLAA 2016 and the IT(TP)A 1997 to make a number of technical refinements to the income tax law so that the new tax system for managed investment trusts operates as intended.

1.10 These amendments clarify the operation of the income tax law applying to MITs and AMITs and make a number of modifications which are broadly in four parts.

1.11 Part 1 makes modifications to the MIT and AMIT rules to:

•

allow a MIT with a single unitholder that is a specified widely-held entity to access the AMIT regime;

•

extend the list of eligible investors in MITs to include the Future Fund Board of Guardians and its wholly owned entities;

•

ensure that, in calculating rounding adjustments and trustee shortfall tax under the AMIT regime, discount capital gains are treated appropriately; and

•

clarify that, in relation to an amount that is a discount capital gain that is not attributed to members, the trustee of an AMIT is liable to pay income tax on the amount as though it were not a discount capital gain.

1.12 Part 2 makes modifications to the MIT and AMIT CGT rules to:

•

clarify that the amount of the capital gain under CGT event E10 will be the cost base net amount where the cost base of the asset is nil at the start of the income year; and

•

align the CGT outcomes for MITs with AMITs.

1.13 Part 3 makes modifications to the withholding tax rules for MITs and AMITs to:

•

clarify that withholding tax liabilities arise on amounts of actual or deemed fund payments and DIR payments to foreign members by an AMIT or a custodian;

•

ensure that fund payments made by MITs and AMITs include capital losses from non-taxable Australian property that have been applied against capital gains from taxable Australian property;

•

clarify that AMITs which only make deemed payments to members can be withholding MITs; and

•

clarify how the TFN withholding rules apply to AMITs that make deemed payments to members.

1.14 Part 4 makes modifications to the operation of the AMIT transitional rules to:

•

ensure that former public trading trusts and corporate unit trusts can continue to use accumulated franking credits until 30 June 2019; and

•

ensure early balancing trusts can elect into the AMIT regime from the 2016-17 income year.

Comparison of key features of new law and current law

Detailed explanation of new law

1.15 Schedule 1 to this Bill makes a number of technical refinements to the income tax law affecting MITs and AMITs. The refinements are broadly categorised into the following parts:

•

Part 1 makes modifications to the primary AMIT rules;

•

Part 2 makes modifications to the MIT and AMIT CGT rules;

•

Part 3 makes modifications to the withholding tax rules for AMITs; and

•

Part 4 makes modifications to the operation of the AMIT transitional rules.

Part 1 - Modifications to the primary AMIT rules

1.16 Amendments to the primary MIT and AMIT rules will:

•

allow a MIT with a single unitholder that is a specified widely-held entity to access the AMIT regime;

•

extend the list of eligible investors in MITs to include the Future Fund Board of Guardians and its wholly owned entities;

•

ensure that, in calculating rounding adjustments and trustee shortfall tax under the AMIT regime, discount capital gains are treated appropriately; and

•

clarify that, in relation to an amount that is a discount capital gain that is not attributed to members, the trustee of an AMIT is liable to pay income tax on the amount as though it were not a discount capital gain.

Single unit holder MITs can elect into the AMIT regime

1.17 A trust will qualify as a MIT if, among other things, it is widely-held. For these purposes, a trust will be taken to be widely-held if one or more of its members is a specified widely-held entity (such as a life insurance company or another MIT).

1.18 To qualify as an AMIT, a MIT must satisfy some additional conditions (section 276-10). Currently, if a trust is a MIT because one of its members is a specified widely-held entity, the MIT can be an AMIT only if that member is another MIT (paragraph 276-10(1)(c)). This requirement is unnecessarily restrictive and was unintended. Therefore, paragraph 276-10(1)(c) is being removed. [Schedule 1, item 9]

1.19 This ensures that, provided that other requirements are satisfied, a MIT that has a single unitholder that is any one of the specified widely-held entities in section 275-45 can access the AMIT regime.

Extending the list of eligible investors in MITs

1.20 The amendments extend the list of specified widely-held entities to include the Future Fund Board of Guardians (as established by section 34 of the Future Fund Act 2006) and its wholly owned entities. Any financial assets held by the Board, for the purposes of its wholly owned entities, will be taken to be held by the Board in its own right. [Schedule 1, items 7, 8 and 17, paragraph 275-20(4)(ia), subsection 275-20(4A) and the definition of 'Future Fund Board' in subsection 995-1(1)]

Discount capital gains treated appropriately

Rounding adjustments

1.21 Under the AMIT 'unders' and 'overs' regime, the trust component of a particular character is decreased by the amount of a rounding adjustment surplus where the sum of all the determined member components exceeds the determined trust components of that character for the income year (section 276-315).

1.22 Currently, where the relevant character is a discount capital gain, the amounts are doubled for the purposes of the determined member component. However, the amounts are not doubled for the purposes of the determined trust component.

1.23 The amendments ensure that, where the relevant character is a discount capital gain, the amount of the determined member component will not be doubled and remain as the discounted amount.

1.24 This provides a 'like for like' comparison under subsection 276-315(3) to ensure equal treatment of discount capital gain amounts in relation to the determined member component and determined trust component under the rounding adjustment rules. [Schedule 1, item 10]

Trustee shortfall tax

1.25 Under the AMIT regime, the trustee of an AMIT is subject to trustee shortfall taxation if, broadly, there is an under-attribution of income. This occurs because the sum of the determined member components of a particular character fall short of the determined trust component of that character (section 276-415).

1.26 Currently, where the relevant character is a discount capital gain, the amounts are doubled for the purposes of the determined member component. However, the amounts are not doubled for the purposes of the determined trust component.

1.27 The amendments ensure that, where the relevant character is a discount capital gain, the amount of the determined member component will not be doubled and remain the discounted amount. [Schedule 1, item 11, subsection 276-415(4)]

1.28 This provides a 'like for like' comparison under subsection 276-415(1) and ensures equal treatment of discount capital gain amounts in relation to both the determined member component and determined trust component when working out whether a shortfall has occurred.

1.29 In addition, the amendments ensure that where the relevant character is a discount capital gain, the trustee will be liable to pay income tax on double the amount of the shortfall. That is, the amount on which the trustee is liable to pay tax is double the amount that it would otherwise be under subsection 276-415(2). [Schedule 1, item 11, subsection 276-415(4)]

1.30 This ensures that the trustee is liable to pay income tax on the under-attributed component as though it were not a discount capital gain.

Part 2 - Modifications to the MIT and AMIT CGT rules

1.31 Amendments to the MIT and AMIT CGT rules will:

•

clarify that the amount of the capital gain under CGT event E10 will be the cost base net amount where the cost base of the asset is nil at the start of the income year; and

•

align the CGT outcomes for MITs with AMITs.

CGT event E10 can occur where the cost base is nil

1.32 Broadly, where a member of an AMIT (who holds a CGT asset that is their membership interest in the AMIT) receives non-assessable distributions from the AMIT, adjustments are made to the cost base and reduced cost base of the membership interest. Where the net amount of those adjustments are greater than the asset's cost base:

•

the asset's cost base is reduced to nil; and

•

any remaining excess gives rise to a capital gain under CGT event E10 (section 104-107A).

1.33 The amendments clarify that where the cost base of an asset cannot be reduced for an income year (because the cost base of that asset was nil at the start of the income year), the amount of the capital gain under CGT event E10 will be the asset's AMIT cost base net amount. [Schedule 1, items 3 and 5, paragraphs 104-107A(1)(b), (c) and (d) and subsection 104-107A(3)]

1.34 Further, where the asset's cost base is nil at the start of the income year, the CGT event occurs at the time at which the cost base would have been reduced under subsection 104-107B(2) during the income year if the cost base had been greater than nil at the start of the income year. [Schedule 1, item 4, subsection 104-107A(2)]

Aligning the CGT outcomes of MITs with AMITs

1.35 Broadly, a capital gain arises under CGT event E4 for MITs (section 104-70(4)), and under CGT event E10 for AMITs (section 104-107A), if the sum of the amounts of non-assessable payments is more than the cost base of the units in the MIT or AMIT.

1.36 Stakeholders have raised concerns that there is some uncertainty as to whether CGT event E4 operates to exclude certain amounts (such as capital gains that have been applied against capital losses) from the amount of non-assessable payments. If such amounts were excluded, those amounts would not reduce the cost base of the units in the MIT. In contrast, those same amounts are not excluded under CGT event E10 and therefore reduce the cost base of the units in an AMIT.

1.37 The amendments clarify the operation of CGT event E4 by removing any doubt that, if an entity receives a payment from a trust that is a MIT, a capital loss reflected in the payment is not excluded from the non-assessable part of the payment - that is, item 7 of the table in subsection 104-71(4) will not apply to the payment. [Schedule 1, item 2, subsection 104-71(6)]

1.38 This clarifies that the outcomes for the members of MITs under CGT event E4 are consistent with the outcomes for members of AMITs under CGT event E10.

Example 1.1

Lorilee holds units in a MIT. The total cost base of the units is $300. During the income year, the MIT receives a discount capital gain of $200 (attributable to Lorilee's units) from its investment in XYZ trust. It also has a capital loss of $200 (attributable to Lorilee's units). As a result, the value of Lorilee's investment in the MIT ($300) does not change.

Before the end of the income year, the MIT makes a payment of $200 to Lorilee. The MIT advises Lorilee that the payment relates to the capital gain which has been reduced to nil for income tax purposes due to the application of the capital loss in the MIT.

At the end of the income year, the MIT would need to classify this as a non-assessable amount as no part of the capital gain can be disregarded under item 7 of the table in subsection 104-71(4), even if the tracing requirements of that subsection are met.

Lorilee must reduce the cost base of the units to $100. Lorilee would make no capital gain or loss if she then sold the units for their market value of $100.

If the MIT was an AMIT, Lorilee would have a cost base net amount of $200 as an excess under section 104-107C and would need to reduce the cost base of her units to $100 under 104-107B (CGT event E10).

If Lorilee then sold her units in the AMIT for their market value of $100 she would make no capital gain or loss.

Part 3 - Modifications to the withholding tax rules for MITs and AMITs

1.39 Amendments to the withholding tax rules for MITs and AMITs will:

•

clarify that withholding tax liabilities arise on amounts of actual or deemed fund payments and DIR payments to foreign members by an AMIT or a custodian;

•

ensure that fund payments made by MITs and AMITs include capital losses from non-taxable Australian property that have been applied against capital gains from taxable Australian property;

•

clarify that AMITs which only make deemed payments to members can be withholding MITs; and

•

clarify how the TFN withholding rules apply to AMITs that make deemed payments to members.

MIT withholding provisions apply to attributed amounts

Fund payments

1.40 Under the AMIT regime, when a MIT or an AMIT makes a fund payment to a foreign resident member, the foreign resident has a liability to withholding tax in relation to the fund payment (Subdivision 840-M).

1.41 The amendments insert notes into subsections 840-805(2) and (3) to clarify that deemed payments made by an AMIT may be treated as having been paid to the member by a withholding MIT or a custodian for the purposes of determining the withholding tax liability on the fund payment. [Schedule 1, items 12 to 15, subsections 840-805(2) and (3)]

1.42 This clarifies that the withholding tax rules apply to the amounts of the fund payment that are attributed to foreign resident members by an AMIT, in addition to amounts which are actually paid.

1.43 Further, a note has been inserted into subsection 840-805(2) to clarify that, for the purposes of determining the liability for withholding tax in respect to AMITs, the amount of a particular fund payment may not reflect the actual amount paid. This outcome can arise because, under the method statement in subsection 12A-110(5) in Schedule 1 to the TAA 1953, the amount of a fund payment can be adjusted to account for earlier fund payments and expected later fund payments. [Schedule 1, item 13, note 1 to subsection 840-805(2)]

1.44 However, it is generally expected that the sum of fund payments made by an AMIT in respect of a particular income year will equal the sum of actual payments and deemed payments made by the AMIT in respect of that income year.

DIR payments

1.45 Generally, if an Australian resident makes a DIR payment to a foreign resident, the foreign resident is liable to withholding tax on the amount paid (section 128B of the ITAA 1936).

1.46 A note has been inserted into subsection 128B(1A) of the ITAA 1936 to clarify that deemed payments made by an AMIT are treated as having been paid to the member by a withholding MIT or a custodian for the purposes of determining the withholding tax liability on the DIR payments. [Schedule 1, item 1, note to subsection 128B(1A) of the ITAA 1936)]

1.47 This clarifies that the withholding tax rules apply to the amounts of DIR payments that are attributed to foreign resident members by an AMIT, in addition to amounts which are actually paid.

1.48 Amendments have also been made to subsection 12A-215(1) to ensure that all AMITs (whether or not they are a withholding MIT) will have a withholding obligation in respect of any deemed DIR payments made in relation to the income year. [Schedule 1, items 31 to 33, paragraph 12A-215(1)(a) and subparagraphs 12A-215(1)(c)(i) and (ii) in Schedule 1 to the TAA 1953]

AMIT and MIT fund payments calculated only on taxable Australian property gains

1.49 Broadly, fund payments are amounts of assessable income derived by a MIT or an AMIT that are paid or attributed to members.

1.50 For a MIT, the total of the fund payments in relation to an income year equals, as nearly as practicable, the net income of the trust for the income year, disregarding any excluded components (section 12-405 in Schedule 1 to the TAA 1953).

1.51 For an AMIT, the total of the fund payments in relation to an income year equals, as nearly as practicable, the total of the determined member components for the income year that are of an assessable income character, disregarding any excluded components (section 12A-110 in Schedule 1 to the TAA 1953).

1.52 For a MIT, the method statement for working out the amount of a fund payment in relation to an income year is modified to ensure that, in calculating the fund payments, a capital loss or a carry-forward capital loss from non-taxable Australian property which has been applied against a capital gain from taxable Australian property in that income year (under subsections 12-405(2A) and (2B)) is added back.

1.53 To achieve this, step 1 of the method statement is modified to increase the amount of the actual payment by amounts to which subsection 12-405(2A) or (2B) applies for the income year, except to the extent that the capital gain against which those amounts are applied are included in the actual payment made in relation to that income year. [Schedule 1, items 25 to 28, subsections 12-405(2), (2A), (2B) in Schedule 1 to the TAA 1953]

1.54 In addition, the net income of the trust will be increased by the amounts to which subsections 12-405(2A) or (2B) applies for the income year under step 2 of the method statement. As the amounts to which subsections 12-405(2A) and (2B) apply are expressly considered in step 2 of the method statement under paragraph (aa), they will not be considered under paragraph (a). [Schedule 1, items 26 and 27, paragraphs (aa) and (a) of step 2 of the method statement in subsection 12-405(2) in Schedule 1 to the TAA 1953]

1.55 For an AMIT, similar modifications are made to the total of the fund payments (subsection 12A-110(3)) to achieve a consistent result. [Schedule 1, items 29 and 30, paragraphs 12A-110(3)(b) and (c) and subsection 12A-110(3A) in Schedule 1 to the TAA 1953]

1.56 This ensures that, where a fund payment is made to a foreign resident member, the amount of withholding tax payable by the MIT or AMIT is calculated on taxable Australian property net capital gains.

Example 1.2

During the 2019-20 income year, the trustee of the LTV MIT made $5 million capital gain from CGT event happening in relation to a CGT asset that was taxable Australian property.

The LTV MIT also had $7 million carried forward net capital loss in relation to a CGT asset that was not taxable Australian property, which fully offset the capital gain.

During the income year, the LTV MIT made a payment of $5 million to its members. The net income of the LTV MIT for the year is nil.

The LTV MIT must apply the method statement in subsection 12-405(2) to work out how much of the actual payment of $5 million is a fund payment in relation to the income year.

Under step 1 of the method statement, the actual payment of $5 million does not need to be adjusted as the $5 million capital gain from a taxable Australian property is included in the actual payment.

Under step 2, to work out the 'net income of the trust', the LTV MIT must add back $5 million of the net capital loss from the non-taxable Australian property which was offset against the capital gain from taxable Australian property. Therefore, the net income of the trust for the purposes of step 2 is $5 million.

Therefore, for the 2019-20 income year, the amount of the fund payment made by LTV MIT is $5 million.

Withholding MIT provisions apply to deemed payments

1.57 Generally, where a deemed payment arises, an AMIT may have an obligation to pay an amount to the Commissioner if, among other things, it is a withholding MIT (section 12-383 in Schedule 1 to the TAA 1953). The obligation applies to a withholding MIT that makes a fund payment to foreign members.

1.58 The amendment clarifies that an AMIT which only makes a deemed payment to a foreign resident can be a withholding MIT. [Schedule 1, item 24, subsection 12-383(2) in Schedule 1 to the TAA 1953]

1.59 This ensures that an AMIT which only makes deemed payments for an income year (and does not make actual cash distributions) will be a withholding MIT, provided that other requirements are satisfied.

1.60 Further, the definition of a withholding MIT has been expanded to include MITs which make no fund payments in relation to an income year. [Schedule 1, item 23, paragraph 12-383(1)(a) in Schedule 1 to the TAA 1953]

TFN withholding provisions apply appropriately to AMITs

Deemed payments to be treated as amounts paid

1.61 The amendments clarify that deemed payments made by an AMIT are treated as having been paid to the investor for the purposes of determining whether amounts are required to be withheld from a payment made by the AMIT. [Schedule 1, item 19, note to subsection 12-140(1) in Schedule 1 to the TAA 1953]

Trustee can recover amounts from an investor

1.62 If an AMIT pays an amount of TFN withholding to the Commissioner in respect of a deemed payment it makes to a member because the member has not quoted its TFN, the AMIT can recover the amount withheld from the member as a debt that is owed to the AMIT. The AMIT can recover the amount by setting it off against debts due by the AMIT to the member. [Schedule 1, item 20, subsections 12-140(3) and (4) in Schedule 1 to the TAA 1953]

Ensuring amounts are subject to appropriate TFN withholding

1.63 The amendments limit the application of the TFN withholding rules under section 12-140 in Schedule 1 to the TAA 1953 to ensure that they do not apply to amounts which have already been subject to TFN withholding. These amounts include:

•

the pre-AMMA actual payment portion of a deemed payment, to the extent that TFN withholding has already been applied to the pre-AMMA actual payment amount; and

•

the pre-AMMA actual payment or deemed payment portion of a post-AMMA actual payment, to the extent that TFN withholding has already been applied to the pre-AMMA actual payment or deemed payment amounts.

[Schedule 1, item 21, subsection 12-152 in Schedule 1 to the TAA 1953]

Part 4 - Modifications to the operation of the AMIT transitional rules

1.64 Amendments to the AMIT transitional rules will:

•

ensure that former public trading trusts and corporate unit trusts can continue to use accumulated franking credits until 30 June 2019; and

•

ensure early balancing trusts can elect into the AMIT regime from the 2016-17 income year.

Transitional rules regarding franked distributions

1.65 As part of the AMIT reforms, transitional rules (item 75 of Schedule 5 to the TLAA 2016) applied so that trusts which ceased to be corporate unit trusts or public trading trusts (and therefore were no longer a corporate tax entity) could continue to treat distributions as frankable distributions and utilise accumulated franking credits until 30 June 2018.

1.66 The amendments improve the operation of the transitional rules by ensuring that:

•

franking credits of former corporate unit trusts and public trading trusts are retained by varying the application of the franking debit rules (section 205-30) from the time the trust ceased to be a franking entity to 1 July 2019;

•

distributions made by these trusts to beneficiaries retain the character of a dividend, paid from a corporate tax entity, during the transitional period (that is on or after the cessation time but before 1 July 2019); and

•

when an entity ceases to be a franking entity and the entity's franking account is in surplus immediately before ceasing to be a franking entity, the trust is treated as a corporate tax entity.

[Schedule 1, items 35 to 42, subitems 75(2), (2A), (3A), (4) and (6) of Schedule 5 to the TLAA 2016]

1.67 Further, for the purposes of determining whether the trust can frank a distribution, the amendments ensure that the distribution must not be made out of income derived in relation to the 2016-17 income year or a later income year. As a result, trusts with substituted accounting periods are able to distribute franking credits arising from tax paid on income derived during the entire income year in which they were treated as a corporate unit trust or public trading trust. [Schedule 1, item 41, paragraph 75(4)(c) of Schedule 5 to the TLAA 2016]

1.68 Therefore, trusts that ceased to be corporate unit trusts or public trading trusts under the AMIT reforms will be able to pass on franking credits to members until 30 June 2019 provided that the other requirements of the transitional rules are satisfied.

MITs with substituted accounting periods can elect into the AMIT regime for the 2016-17 and later income years

1.69 Under the application provisions of the AMIT regime (paragraph 1(1)(a) of Schedule 8 to the TLAA 2016), a trust can elect into the AMIT regime for income years starting on or after 1 July 2016.

1.70 The amendments provide additional flexibility to the application provisions by allowing trusts to elect into the AMIT regime for the 2016-17 and later income years, regardless of when those income years start. This ensures that eligible MITs with substituted accounting periods (for example, starting before 1 July) can elect into the AMIT regime for the 2016-17 and later income years. [Schedule 1, items 18 and 43 to 45, subitem 1(1) of Schedule 8 of the TLAA 2016 and the definition of 'starting income year' in section 276-25 of the IT(TP)A 1997]

Example 1.3

SLI is an early balancing trust with a substituted accounting period commencing on 1 April each year. SLI will be able to elect into the AMIT regime for the 2016-17 income year.

Minor and consequential amendments

1.71 Schedule 1 to this Bill also makes minor consequential amendments to the income tax law to update various provisions to take into account the AMIT technical amendments and repeal provisions that are no longer necessary. [Schedule 1, items 6, 16, 22, 34 and 39]

Application provisions

1.72 The amendments made in relation to aligning the CGT outcomes of MITs with AMITs applies to distributions made in relation to the 2017-18 income year and to later income years. [Schedule 1, subitem 46(1)]

1.73 The amendment made in relation to allowing single unit holder MITs to elect into the AMIT regime apply in relation to the 2017-18 income year and to later income years. [Schedule 1, subitem 46(2)]

1.74 The amendments made in relation to allowing MITs with substituted accounting periods to elect into the AMIT regime apply in relation to the 2016-17 income year and to later income years. [Schedule 1, subitem 46(3)]

1.75 All other amendments made in this Bill apply in relation to the 2018-19 income year and to later income years. [Schedule 1, subitem 46(4)]

1.76 Therefore, the amendments generally apply to 2018-19 income year and to later income years. The amendments which apply to income years prior to the 2018-19 income year have been actively sought by stakeholders and will ensure that the AMIT regime operates as intended and applies in a way that is consistent with current industry practice. No taxpayer will be disadvantaged by these amendments.

Chapter 2 Deductible gift recipients

Outline of chapter

2.1 Schedule 2 to this Bill amends the ITAA 1997 to update the list of specifically listed DGRs to include:

•

Australian Sports Foundation Charitable Fund;

•

Australian Women Donors Network;

•

Paul Ramsay Foundation Limited;

•

The Q Foundation Trust;

•

Smile Like Drake Foundation Limited; and

•

Victorian Pride Centre Ltd.

Context of amendments

Deductible gift recipient status

2.2 The income tax law allows income tax deductions for taxpayers who make gifts of $2 or more to a DGR. DGRs are entities which fall within one of the general categories set out in Division 30 of the ITAA 1997 or are specifically listed by name in that Division.

2.3 DGR status helps eligible organisations attract public financial support for their activities.

Australian Sports Foundation Charitable Fund

2.4 Australian Sports Foundation Charitable Fund is a registered charity established to support projects where sport is the vehicle to achieve charitable aims.

Australian Women Donors Network

2.5 Australian Women Donors Network is a registered charity established to provide a voice for gender inclusive philanthropy across all focus areas including education, health, disability, youth and the arts.

Paul Ramsay Foundation Limited

2.6 Paul Ramsay Foundation Limited is a registered charity established to be the recipient of the Ramsay bequest from the Paul Ramsay Foundation to pursue one or more of the following charitable purposes in Australia: advancing health, advancing education and advancing social or public welfare.

The Q Foundation Trust

2.7 The Q Foundation Trust is a registered charity with the principal purpose of advancing education and engagement in science and technology in Australia.

Smile Like Drake Foundation Limited

2.8 Smile Like Drake Foundation Limited is a registered charity that supports research into preventing drowning and provides water safety education programs for schools.

Victorian Pride Centre Ltd

2.9 Victorian Pride Centre Ltd is a registered charity established to own and operate a centre in the State of Victoria to facilitate and host support services, facilities and resources for the lesbian, gay, bisexual, transgender, and/or intersex community.

Summary of new law

2.10 The amendments made by Schedule 2 make the Australian Sports Foundation Charitable Fund, Australian Women Donors Network, Paul Ramsay Foundation Limited, The Q Foundation Trust, Smile Like Drake Foundation Limited and Victorian Pride Centre Ltd DGRs.

Detailed explanation of new law

Australian Sports Foundation Charitable Fund (ABN 97 179 064 897)

2.11 Taxpayer may claim an income tax deduction for gifts of $2 or more to the Australian Sports Foundation Charitable Fund provided the gift complies with the existing requirements of the income tax law. [Schedule 2, item 3, item 10.2.9 in the table in section 30-90 of the ITAA 1997]

2.12 This amendment ensures that the Australian Sports Foundation Charitable Fund receives appropriate support through the Commonwealth tax system for supporting projects where sport is the vehicle to achieve charitable aims.

Australian Women Donors Network (ABN 28 141 197 471)

2.13 Taxpayers may claim an income tax deduction for gifts of $2 or more to the Australian Women Donors Network provided the gift complies with the existing requirements of the income tax law. [Schedule 2, item 4, table item 11.2.11 in section 30-95 of the ITAA 1997]

2.14 This amendment ensures that the Australian Women Donors Network receives appropriate support through the Commonwealth tax system for providing a voice for gender inclusive philanthropy across all focus areas.

Paul Ramsay Foundation Limited (ABN 32 623 132 472)

2.15 Taxpayers may claim an income tax deduction for gifts of $2 or more to the Paul Ramsay Foundation Limited provided the gift complies with the existing requirements of the income tax law. [Schedule 2, item 5, table item 13.2.24 in section 30-105 of the ITAA 1997]

2.16 This amendment ensures that the Paul Ramsay Foundation Limited receives appropriate support through the Commonwealth tax system for pursuing its charitable purposes in Australia.

The Q Foundation Trust (ABN 95 941 852 608)

2.17 Taxpayers may claim an income tax deduction for gifts of $2 or more to The Q Foundation Trust provided the gift complies with the existing requirements of the income tax law. [Schedule 2, item 1, table item 2.2.46 in subsection 30-25(2) of the ITAA 1997]

2.18 This amendment ensures that The Q Foundation Trust receives appropriate support through the Commonwealth tax system for advancing education and engagement in science and technology in Australia.

Smile Like Drake Foundation Limited (ABN 33 164 893 261)

2.19 Taxpayers may claim an income tax deduction for gifts of $2 or more to the Smile Like Drake Foundation Limited provided the gift complies with the existing requirements of the income tax law. [Schedule 2, item 1, table item 2.2.45 in subsection 30-25(2) of the ITAA 1997]

2.20 This amendment ensures that the Smile Like Drake Foundation Limited receives appropriate support through the Commonwealth tax system for supporting research into preventing drowning and providing water safety education programs for schools.

Victorian Pride Centre Ltd (ABN 68 615 432 838)

2.21 Taxpayers may claim an income tax deduction for gifts of $2 or more to the Victorian Pride Centre Ltd provided the gift complies with the existing requirements of the income tax law. [Schedule 2, item 2, table item 4.2.44 in subsection 30-45(2) of the ITAA 1997]

2.22 This amendment ensures that the Victorian Pride Centre Ltd receives appropriate support through the Commonwealth tax system for facilitating and hosting support services, facilities and resources for the lesbian, gay, bisexual, transgender, and intersex community.

Consequential amendments

2.23 Schedule 2 also updates the index of DGRs in Division 30 of the ITAA 1997 to reflect the new listings. [Schedule 2, items 6 to 10, table items 27AAAA, 27AAAB, 83, 94AA, 111AB and 121B in section 30-315 of the ITAA 1997]

Application and transitional provisions

2.24 The amendments apply to gifts of $2 or more to the Australian Sports Foundation Charitable Fund after 30 June 2018 and before 1 July 2023. [Schedule 2, item 3, third column of table item 10.2.9 in section 30-90 of the ITAA 1997]

2.25 The amendments apply to gifts of $2 or more to the Australian Women Donors Network after 8 March 2018 and before 9 March 2023. [Schedule 2, item 4, third column of table item 11.2.11 in section 30-95 of the ITAA 1997]

2.26 The amendments apply to gifts of $2 or more to the Paul Ramsay Foundation Limited after 30 June 2018 and before 1 July 2020. [Schedule 2, item 5, third column of table item 13.2.24 in section 30-105 of the ITAA 1997]

2.27 The amendments apply to gifts of $2 or more to The Q Foundation Trust after 31 December 2017 and before 1 January 2023. [Schedule 2, item 1, third column of table item 2.2.46 in subsection 30-25(2) of the ITAA 1997]

2.28 The amendments apply to gifts of $2 or more to the Smile Like Drake Foundation Limited after 8 March 2018 and before 9 March 2023. [Schedule 2, item 1, third column of table item 2.2.45 in subsection 30-25(2) of the ITAA 1997]

2.29 The amendments apply to gifts of $2 or more to the Victorian Pride Centre Ltd after 8 March 2018 and before 9 March 2023. [Schedule 2, item 2, third column of table item 4.2.44 in subsection 30-45(2) of the ITAA 1997]

2.30 The amendments apply retrospectively. This ensures that gifts that have been made to the entities to which this Schedule applies qualify for income tax deductions from the above application dates provided the gifts comply with all requirements of the income tax law. The changes are wholly beneficial both to taxpayers making gifts of $2 or more to these DGRs and also to the DGR entities that receive these gifts.

2.31 The amendments commence on the first day of the first quarterly period following Royal Assent. [Clause 2]

Chapter 3 Extending DGR status to entities promoting Indigenous languages

Outline of chapter

3.1 Schedule 3 extends DGR status to entities promoting Indigenous languages.

Context of amendments

3.2 The income tax law allows income tax deductions for taxpayers who make gifts of $2 or more to a DGR. DGRs are entities which fall within one or more of the general categories set out in Division 30 of the ITAA 1997 or are specifically listed by name in that Division.

3.3 DGR status helps eligible organisations attract public financial support for their activities.

3.4 The income tax law provides support to 'cultural organisations' that have a principal purpose of, amongst other things, promoting the arts of Indigenous persons. However, prior to these amendments this did not include organisations that had a principal purpose of promoting the languages of Indigenous persons.

3.5 There are estimated to be 250 original Aboriginal and Torres Strait Islander languages and over 600 dialects. The Government has a range of other measures in place to prevent the loss of these languages.

3.6 In the 2017-18 MYEFO, the Government announced that it would extend DGR status to organisations that have a principal purpose of promoting Indigenous languages. The extension of DGR status adds to the existing Government initiatives that support Indigenous culture and provides appropriate assistance through the tax system for the public to make donations to these organisations.

Summary of new law

3.7 Schedule 3 extends DGR status to entities promoting Indigenous languages.

Detailed explanation of new law

3.8 The eligibility criteria for an entity to be eligible to be endorsed as an entity on the register of cultural organisations is amended so that it includes entities that have the principal purpose of promoting Indigenous languages. [Schedule 3, item 1, subsection 30-300(2) of the ITAA 1997]

3.9 The term 'Indigenous person' is defined in the ITAA 1997 to mean a member of the Aboriginal race of Australia, or a descendant of an Indigenous inhabitant of the Torres Strait Islands. The languages of Indigenous persons are intended to refer to the traditional or historical languages of those persons. Extending DGR eligibility to organisations that promote these languages will assist in the languages' preservation.

Application and transitional provisions

3.10 The amendments in Schedule 3 commence on 1 July 2019. [Clause 2]

Chapter 4 Repeal of subsection 51(3) of the Competition and Consumer Act 2010

Context of amendments

4.1 The Competition and Consumer Act 2010 (CCA) prohibits companies and other persons from engaging in certain types of conduct that reduce competition, such as cartel behaviour and exclusive dealing. Subsection 51(3) provides an exemption from certain prohibitions in the CCA for conditional licensing or assignment of intellectual property (IP) rights such as patents, registered designs, copyright or eligible circuit layout rights.

4.2 The exemption does not apply to the provisions prohibiting misuse of market power, misuse of market power in a Trans-Tasman market or resale price maintenance of the CCA.

4.3 The Productivity Commission's (Commission) Intellectual Property Arrangements Inquiry Report (December 2016) and the Competition Policy Review (March 2015) recommended subsection 51(3) of the CCA be repealed because the rationale for the exemption has largely fallen away. The Report notes that the number of arrangements that are affected by removal of the exemption is likely to be small.

4.4 IP rights and competition are no longer thought to be in 'fundamental conflict'. IP rights do not, in and of themselves, have significant competition implications. Rather, competition implications arise in those cases where there are few substitutes or where the aggregation of IP rights may create market power.

4.5 The Commission considered that commercial transactions involving IP rights, including the assignment and licensing of such rights, should be subject to the CCA in the same manner as transactions involving other property and assets.

4.6 The Commission was of the view that at present, the immediate costs and benefits of removing the exemption under subsection 51(3) are finely balanced. However looking ahead, the benefits could rise as the level of licensing and cross licensing increases, especially in pharmaceutical and communications markets.

4.7 The repeal of subsection 51(3) brings Australia into line with other comparable jurisdictions. As noted by the Competition Policy Review, the United States, Canada and Europe do not provide an exemption from competition laws for conditions of IP transactions. In those jurisdictions, IP assignments and licences and their conditions are assessed under competition laws in the same manner as all other commercial transactions.

Detailed explanation of new law

4.8 Schedule 4 to the Bill repeals subsection 51(3) of the CCA and subsection 51(3) of Schedule 1 to the CCA (the Competition Code). The Competition Code is applied as a law by the states and territories. The amendments remove the exemption for conditional licensing or assignment of IP rights such as patents, registered designs, copyright or eligible circuit layout rights, from Part IV of the CCA (about prohibiting restrictive trade practices). [Schedule 4, items 1 and 3, subsection 51(3) of the CCA and subsection 51(3) of Schedule 1 of the CCA]

4.9 The Schedule commences the day after the end of the period of six months beginning on the day the bill receives the Royal Assent. [Clause 2]

4.10 The amendments apply to a licence granted, an assignment made, or a contract, arrangement or understanding entered into, including any conditions imposed or provisions included in such, on, after or before commencement of the Schedule. [Schedule 4, item 2, Division 4 of Part XIII of the CCA]

4.11 The delayed commencement will give individuals and businesses time to review existing arrangements to ensure they comply with the competition provisions of the CCA. If necessary, they can apply to the Australian Competition and Consumer Commission for authorisation of their existing arrangements under Part VII of the CCA.

4.12 Section 51(xxxi) of the Commonwealth of Australia Constitution Act (the Constitution) provides that the Commonwealth Parliament may only legislate with respect to the acquisition of property by the Commonwealth upon just terms. This item ensures that the amendment does not apply to the extent that it would result in the acquisition of property on unjust terms contrary to section 51(xxxi) of the Constitution. [Schedule 4, item 2, Division 4 of Part XIII of the CCA]

Chapter 5 Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Schedule 1 - AMIT technical amendments

5.1 This Schedule 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.

Overview

5.2 Schedule 1 to this Bill amends the TAA 1953, ITAA 1997, ITAA 1936, TLAA 2016 and the IT(TP)A 1997 to make a number of technical refinements to the income tax law so that the new tax system for managed investment trusts operates as intended.

Human rights implications

5.3 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

5.4 This Schedule is compatible with human rights as it does not raise any human rights issues.

Schedule 2 - Deductible gift recipients

5.5 This Schedule 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.

Overview

5.6 Schedule 2 to this Bill amends the ITAA 1997 to update the list of specifically listed DGRs to include the Australian Sports Foundation Charitable Fund, Australian Women Donors Network, Paul Ramsay Foundation Limited, The Q Foundation Trust, Smile Like Drake Foundation Limited and Victorian Pride Centre Ltd.

Human rights implications

5.7 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

5.8 This Schedule is compatible with human rights as it does not raise any human rights issues.

Schedule 3 - Extending DGR status to entities promoting Indigenous languages

5.9 This Schedule 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.

Overview

5.10 Schedule 3 extends DGR status to entities promoting Indigenous languages. This allows members of the public to make tax deductible gifts to organisations that are endorsed as an entity on the register of cultural organisations because they promote Indigenous languages.

Human rights implications

5.11 This Schedule engages the right to enjoy and benefit from culture contained in Article 27 of the International Covenant on Civil and Political Rights (ICCPR) and Article 15 of the International Covenant on Economic, Social and Cultural Rights (ICESR), as it promotes the preservation of Indigenous languages, which are a form of cultural expression.

5.12 The UN Committee on Economic, Social and Cultural Rights has regarded Indigenous peoples as a minority for the purposes of Article 27, and that culture encompasses many different forms including 'language'.

5.13 There are estimated to be 250 original Aboriginal and Torres Strait Islander languages and over 600 dialects.

5.14 The Bill is compatible with the right to enjoy and benefit from culture, as it promotes the preservation of Indigenous languages. It does this by providing appropriate support through the tax system for entities that promote the preservation of Indigenous languages, by allowing persons that make a donation of $2 or more to those entities to claim a tax deduction.

Conclusion

5.15 This Schedule is compatible with the right to enjoy and benefit from culture contained in Article 27 of the ICCPR and Article 15 of the ICESR, as it promotes the preservation of Indigenous languages.

Schedule 4 -Repeal of subsection 51(3) of the Competition and Consumer Act 2010

5.16 Schedule 4 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.

Overview

5.17 Schedule 4 provides for the repeal of subsection 51(3) of the Competition and Consumer Act 2010 (CCA) and subsection 51(3) of Schedule 1 to the CCA (the Competition Code). This will remove the exemption from Part IV of the CCA (restrictive trade practices) for conditional licensing or assignment of intellectual property (IP) rights such as patents, registered designs, copyright or eligible circuit layout rights. The intention of this amendment is to ensure anti-competitive conduct associated with IP is subject to appropriate regulation. This will promote innovation and competition, and enhance consumer welfare.

5.18 Removing the exemption will mean that offences and civil penalties in Division 1 of Part IV of the CCA will apply to these conditions in licences and assignments of IP. Division 1 of Part IV of the CCA and mirror provisions in the Competition Code contain offences and civil penalty provisions relating to cartel conduct. Under the provisions a person must not make, or give effect to, a contract, arrangement or understanding that contains a cartel provision. A cartel provision is a provision between two parties that are, or would otherwise be, in competition with each other where they partake in any of the following: price-fixing; restricting outputs in the production and supply chain; allocating customers, suppliers or territories; or bid-rigging.

5.19 Sections 45AF and 45AG provide that a person commits an offence if they enter into, or gives effect to, a cartel provision. The fault element is knowledge or belief, and the offence is an indictable offence. Subdivision C (sections 45AJ and 45AK) sets out the corresponding civil penalty provisions.

Human rights implications

5.20 This Schedule engages the following human rights and freedoms:

•

a guarantee against retrospective criminal laws under article 15(1) of the International Covenant on Civil and Political Rights (ICCPR); and

•

the right to be presumed innocent until proven guilty (evidential burden of proof) under article 14(2) of the ICCPR.

Assessment of civil penalties

5.21 The Parliamentary Joint Committee on Human Rights Guidance Note 2: Offence provisions, civil penalties and human rights (December 2014) observes that civil penalty provisions may engage criminal process rights under articles 14 and 15 of the ICCPR, regardless of the distinction between criminal and civil penalties in domestic law. This is because the word 'criminal' has an autonomous meaning in international human rights law. When a provision imposes a civil penalty, an assessment is therefore required as to whether it amounts to a 'criminal' penalty for the purposes of the articles 14 and 15 of the ICCPR.

5.22 The civil penalty provisions in Part IV of the CCA (which will apply more broadly following the repeal of section 51(3)) should not be considered 'criminal' for the purposes of international human rights law.

5.23 While the civil penalty provisions in Part IV are intended to deter people from non-compliance, none of the civil penalty provisions carry a penalty of imprisonment. The statement of compatibility therefore proceeds on the basis that the civil penalty provisions in Part IV of the CCA are not criminal offences for the purposes of articles 14 and 15 of the ICCPR.

Application of criminal offences

5.24 The repeal of subsection 51(3) will apply to a licence granted, an assignment made, or a contract, arrangement or understanding entered into, including conditions imposed, or provisions included in such, on, after or before the commencement of the Bill. This means offence and civil penalty provisions contained in Part IV of the CCA will apply to agreements made prior to the commencement of the Bill.

5.25 Generally, article 15 of the ICCPR prohibits retrospectively making an act or omission a criminal offence. In this instance the application of the offence provisions to existing contracts is appropriate given that the six month delayed commencement will enable entities time to review their arrangements, and apply to the ACCC for authorisation under Part VII of the CCA if they have concerns with application to existing contracts.

5.26 Further, the fault element of the offence requires knowledge or belief. On these grounds the application of the offence provisions to existing contracts are reasonable, necessary and proportionate, particularly given that they do not apply to the general public, but to a sector which should reasonably be aware of their obligations under the CCA (e.g. companies and directors of companies).

Reverse evidential burden of proof

5.27 Upon the repeal of section 51(3), Subdivision D of Part IV of the CCA will apply more broadly. Subdivision D provides the exceptions to the offences and civil penalty provisions set out in sections 45AF, 45AG, 45AJ and 45AK.

5.28 For example, under section 45AM of Subdivision D, a corporation may enter into, or give effect to, a cartel provision, if a provision in the contract provides that the cartel provision is subject to a condition that it will not come into force until a corporation is granted authorisation, and applies for the grant of the authorisation within 14 days after the contract is made. A person who wishes to rely on the exceptions contained in Subdivision D bears the evidential burden of proving the exception.

5.29 Under subsection 13.3(3) of the Criminal Code Act 1995 a defendant who wishes to rely on any exception, provided by the law creating an offence, bears an evidential burden in relation to that matter; the exception need not accompany the description of the offence. Accordingly, the reverse evidential burden of proof is acceptable in this instance as it is limited to reliance on the codified exception, and not the proving of innocence in and of itself.

Conclusion

5.30 Schedule 4 to the bill is compatible with human rights because:

•

the application of offence provisions to existing contracts are largely consistent with article 15(1) ICCPR, and the delayed commencement allows sufficient time for compliance; and

•

the reverse burden of proof is limited to the exception provisions and not the offence provisions, and therefore is consistent with article 14(2) of the ICCPR.

5.31 The Schedule is compatible with human rights because to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.