House of Representatives

Treasury Laws Amendment (2018 Measures No. 1) Bill 2018

Second Reading Speech

Mr Morrison(Treasurer)

I move:

That this bill be now read a second time.

Schedule 1 to this bill makes a number of regulatory improvements to Treasury portfolio laws.

This measure forms part of the government's regulatory reform agenda, which is focused on renewing our existing regulatory systems, to ensure that they are fit for purpose, flexible and capable of adapting to new business models as they emerge.

The regulatory improvements found in Schedule 1 include:

amending the superannuation laws to enable the Commissioner of Taxation to pay certain superannuation amounts directly to individuals with a terminal medical condition;
amending the Corporations Act 2001 to modify the notification and reporting obligations applying to certain corporations that have property in receivership or property in respect of which a controller is acting, and
repealing several inoperative Acts as well as amending the taxation laws to remove a number of inoperative or spent provisions.

These measures were previously introduced in Treasury Legislation Amendment (Repeal Day 2015) Bill 2015 and Omnibus Repeal Day (Spring 2015) Bill 2015 which lapsed on the calling of the 2016 election.

These amendments will reduce compliance costs for both individuals and business.

Schedule 2 to this bill extends tax relief for merging superannuation funds.

When superannuation funds merge, assets need to be transferred to the new merged fund. When these assets are transferred, tax liabilities could arise which would reduce the balances of superannuation members.

The tax relief allows superannuation funds to defer tax consequences on the transfer of assets to the new merged fund. It also allows the transfer of valuable tax losses made in previous years, which would otherwise be lost when funds merged. This tax relief has been in place since December 2008 and was due to lapse in July 2017. Extending the tax relief will ensure that tax isn't an impediment to superannuation funds merging where the mergers are otherwise in the best interests of members. It will also ensure that members' balances are protected when mergers take place.

Schedule 3 to this bill also provides ongoing funding, on a cost recovery basis, to the Gateway Network Governance Body to ensure the efficient operation of the Superannuation Transaction Network. This funding model continues the arrangements used to establish the Superannuation Transaction Network which will expire on 30 June 2018.

Schedule 4 to this bill transfers the regulatory role for early release of superannuation benefits on compassionate grounds from the Chief Executive Medicare (Department of Human Services) to the Commissioner of Taxation (Australian Taxation Office).

The transfer is intended to streamline the process around the release of these benefits to individuals through their superannuation fund. The ATO already administers several programs relating to the release of superannuation benefits and has existing interactions with both superannuation fund members and the superannuation industry.

Schedule 5 to this bill amends the A New Tax System (Goods and Services) Act 1999, Tax Administration Act 1953 and the Income Tax Assessment Act 1997 to give effect to the 2017-18 budget measure to improve the integrity of GST on certain kinds of property transactions.

This schedule is designed to protect GST revenue and stop tax evasion by unscrupulous property developers. From 1 July 2018, purchasers of new residential premises or new residential subdivisions will be responsible for remitting the GST on the purchase price directly to the Australian Taxation Office as part of the settlement process. Currently, purchasers of such properties pay the GST as part of the purchase price to the developers, who in turn are required to remit the GST to the ATO through their next business activity statement.

As the payment to the ATO can occur up to three months after collecting the GST, some developers exploit this time lag by 'phoenixing'-they dissolve their business and set up new entities to avoid remitting the GST to the ATO.

As an unsecured creditor, the ATO is unable to recover the GST owed because the company carrying the GST liability has been stripped of all its assets.

The level of this phoenixing to avoid paying GST has grown significantly over the last decade.

According to ATO data, over the past five years more than 3,700 individuals have been identified as engaged in this sort of activity. These individuals controlled over 12,000 insolvent entities responsible for $1.8 billion in debt written off. The insolvent entities also claimed $1.2 billion in GST credits between 2013 and 2017.

By making purchasers pay the GST to the ATO at the point of settlement, the measure will remove the time lag in GST payment, which is the main enabler of current evasion activity.

Contracts entered into before 1 July 2018 will not be affected by this change as long as the transaction settles before 1 July 2020. The government has worked closely with property developers, lawyers, conveyancers and financiers to develop an effective implementation model that also has minimal impact on the industry and on purchasers.

This schedule is part of a broader package of tax integrity measures that the government announced in the 2017-18 budget to ensure that all entities pay the right amount of tax. These measures include tackling GST fraud in the precious metals industry, improving the integrity of small business capital gains tax concessions, and toughening the multinational anti-avoidance law.

Full details of this bill are contained in the explanatory memorandum.

Debate adjourned.