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2019-2020-2021
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TREASURY LAWS AMENDMENT (2021 MEASURES NO. 7) BILL 2021
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Assistant Treasurer, Minister for Housing and Minister for Homelessness, Social and
Community Housing, the Hon Michael Sukkar MP)
Table of contents
Glossary................................................................................................. 1
General outline and financial impact ...................................................... 3
Chapter 1 Sharing economy reporting regime .............................. 9
Chapter 2 Transitional provisions relating to the repeal of
the Superannuation (Resolution of Complaints)
Act 1993 .................................................................... 17
Chapter 3 Removing the self-education expenses
threshold .................................................................... 25
Chapter 4 Statement of Compatibility with Human Rights .......... 31
Attachment A Extracts from the final report of the Black
Economy Taskforce ................................................... 35
Attachment B Ramsay Review - regulation impact analysis ........... 53
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
AFCA Australian Financial Complaints Authority
AFCA Act Treasury Laws Amendment (Putting
Consumers First--Establishment of the
Australian Financial Complaints Authority)
Act 2018
ASIC Australian Securities and Investments
Commission
ATO Australian Taxation Office
Bill Treasury Laws Amendment (2021 Measures
No. 7) Bill 2021
CIO Credit and Investments Ombudsman
Commissioner Commissioner of Taxation
EDR external dispute resolution
FBTAA 1986 Fringe Benefits Tax Assessment Act 1986
FOS Financial Ombudsman Service
GST Act A New Tax System (Goods and Services Tax)
Act 1999
ICCPR International Covenant on Civil and Political
Rights
ITAA 1936 Income Tax Assessment Act 1936
ITAA 1997 Income Tax Assessment Act 1997
Legislation Act Legislation Act 2003
MEC Group Multiple Entry Consolidated Group
Ramsay Review 2017 Review of the Financial System
External Dispute Resolution and Complaints
Framework
SCT Superannuation Complaints Tribunal
Superannuation Complaints Superannuation (Resolutions of Complaints)
Act Act 1993
TAA 1953 Taxation Administration Act 1953
1
Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
Abbreviation Definition
TPRS Taxable Payments Reporting System
2
General outline and financial impact
Schedule 1 - Sharing economy reporting regime
Schedule 1 to the Bill amends Schedule 1 to the TAA 1953 to require
electronic platform operators to provide information on transactions made
through the platform to the ATO. This measure implements a
recommendation of the report of the Black Economy Taskforce.
Date of effect: The amendments made by Schedule 1 apply from
1 July 2022 for transactions in relation to the supply of taxi travel and
short-term accommodation, and from 1 July 2023 for all other
transactions.
Proposal announced: Schedule 1 implements the measure Black
Economy - introducing a sharing economy reporting regime from the
2019-20 MYEFO.
Financial impact: The measure was estimated to have a cost to the
budget of $5.1 million, in fiscal balance terms, over the forward estimates
period at the time of the 2019-20 MYEFO.
2019-20 2020-21 2021-22 2022-23
0.0 0.0 -7.2 +2.1
This measure also includes an estimated increase in GST payments to the
States and Territories by $4.1 million over the same period.
Human rights implications: Schedule 1 does not raise any human rights
issue. See Statement of Compatibility with Human Rights -- Chapter 4.
Compliance cost impact: The measure in Schedule 1 is estimated to
result in a total average annual regulatory cost of $0.022 million.
Schedule 1 - Summary of regulation impact statement
Regulation impact on business
Impact: The measure is estimated to result in a total average annual
regulatory cost of $0.022 million.
Main points:
• The Government is implementing a reporting regime for the
sharing economy that will require operators of electronic
distribution platforms to report information to the ATO
relating to transactions facilitated through their platform.
3
Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
• The sharing economy has grown significantly in Australia
over recent years and is often conducted through electronic
platforms. Some sellers on these platforms may not be aware
of the tax obligations flowing from this activity and
consequently, are not meeting these obligations.
• The reporting regime enhances Australia's tax reporting
requirements to help ensure these sellers are meeting their tax
obligations and that an unfair advantage, compared to similar
activity elsewhere in the economy, cannot be gained due to
poor tax compliance.
• Consistent with the Government's regulation impact
statement requirements, the Black Economy Taskforce Final
Report has been certified by the Department of the Treasury
as meeting the requirements of a regulation impact
statement.1
• The reforms are expected to result in an overall compliance
cost to business, arising from changes to platforms' systems
to collect and report the required information.
• The executive summary of the report and relevant chapter in
relation to the sharing economy reporting regime is at
Attachment A.
Schedule 2 - Transitional provisions relating to the repeal of
the Superannuation (Resolution of Complaints) Act 1993
Schedule 2 to the Bill amends the AFCA Act to facilitate the closure and
any transitional arrangements associated with AFCA replacing the SCT.
Schedule 2 provides for the transfer of records and documents from the
SCT to ASIC, the remittal of matters on appeal by the Federal Court, and
introduces a rule-making power to allow the Minister to prescribe other
matters of a transitional nature.
Date of effect: Schedule 2 will come into effect on the commencement of
Schedule 3 to the AFCA Act. Commencement of Schedule 3 of the
AFCA Act will be following a proclamation by the Treasurer or the day
after 4 years of the commencement of the AFCA Act. This latter date is
the 5 March 2022.
1
https://treasury.gov.au/review/black-economy-taskforce/final-report (accessed at
12 August 2021)
4
General outline and financial impact
Proposal announced: Schedule 2 partially implements the measure
'Superannuation Complaints Tribunal--completion of casework' from the
2019-20 Budget.
Financial impact: Nil.
Human rights implications: Schedule 2 does not raise any human rights
issue. See Statement of Compatibility with Human Rights -- Chapter 4.
Compliance cost impact: The estimated compliance costs impact for the
specific measures contained in Schedule 2 to the Bill are nil.
Schedule 2 - Summary of regulation impact statement
Regulation impact on business
Impact: The package of reforms to the external dispute resolution
framework in response to the Ramsay Review, including the measures
enacted through the Treasury Laws Amendment (Putting Consumer First
- Establishment of the Australian Financial Complaints Authority)
Act 2018, are estimated to have a compliance cost impact of $43.85
million each year. The estimated compliance costs impact for the specific
measures contained in Schedule 2 to the Bill are nil.
Main points:
• The Government has been informed of the regulatory impacts of
various reform options by the Ramsay Review. The Ramsay Review
was commissioned by the Government in May 2016 and led by an
expert panel, chaired by Professor Ian Ramsay.
• Extensive consultation with both industry and consumer stakeholders
was undertaken as part of the Ramsay Review.
• The review panel found that the framework that existed at the time
was a product of history rather than design and that reform is needed.
The panel identified that the existence of multiple external dispute
resolution schemes with overlapping jurisdictions means that:
o it is difficult to achieve comparable outcomes for consumers
with similar complaints;
o it is more difficult for consumers to progress disputes
involving firms that are members of different schemes; and
o there is an increased risk of consumer confusion.
• Alternative reform options were considered and included having
targeted reforms to the SCT and establishing a statutory tribunal.
• The review found that the dispute resolution arrangements for
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Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
superannuation were not effective and that superannuation disputes
should be resolved by an ombudsman scheme, rather than a statutory
tribunal (such as the SCT).
• The Ramsay Review2 has been certified as being informed by a
process and analysis equivalent to a regulation impact statement.3
Additional analysis is at Attachment B.
Schedule 3 - Removing the self-education expenses
threshold
Schedule 3 to the Bill removes the $250 non-deductible threshold for
work-related self-education expenses by repealing section 82A of the
ITAA 1936.
Removing the $250 non-deductible threshold reduces compliance costs
for individuals claiming self-education expense deductions and simplifies
the tax return process.
Date of effect: Schedule 3 commences on the first 1 January, 1 April,
1 July or 1 October to occur after the Bill receives Royal Assent.
The amendments to the ITAA 1936 and ITAA 1997 apply to assessments
for the 2022-23 income year and later income years. The amendments to
the FBTAA 1986 apply to the FBT year starting on 1 April 2023 and to
later FBT years.
Proposal announced: Schedule 3 fully implements the measure
'Reducing compliance costs for individuals claiming self-education
expense deductions' from the 2021-22 Budget.
Financial impact: Schedule 3 is estimated to have a negligible impact on
receipts over the forward estimates period:
2020-21 2021-22 2022-23 2023-24 2024-25
- - - .. ..
- Nil
.. Not zero, but rounded to zero
Human rights implications: Schedule 3 does not raise any human rights
issues. See Statement of Compatibility with Human Rights -- Chapter 4.
2
Details of the Ramsay Review and the final report are available at:
https://treasury.gov.au/review/review-into-dispute-resolution-and-complaints-framework/
3
Details of the certification process are available at: https://obpr.pmc.gov.au/published-
impact-analyses-and-reports/new-financial-sector-dispute-resolution-and-complaints
6
General outline and financial impact
Compliance cost impact: Schedule 3 is expected to reduce compliance
costs for individuals claiming self-education expense deductions.
7
Chapter 1
Sharing economy reporting regime
Outline of chapter
1.1 Schedule 1 to the Bill amends Schedule 1 to the TAA 1953 to
require electronic platform operators to provide information on
transactions facilitated through the platform to the ATO. This measure
implements a recommendation of the report of the Black Economy
Taskforce.
1.2 All legislative references in this Chapter are to Schedule 1 to the
TAA 1953 unless otherwise stated.
Context of amendments
The sharing economy and tax
1.3 The Australian economy has fundamentally changed in recent
decades. Traditional employment models have shifted in favour of more
flexible options including contracting, self-employment and use of labour
hire. Consumers are increasingly paying to 'use' rather than 'own' assets,
creating new income opportunities for the owners of assets. These two
trends have led to the emergence of the sharing economy, also sometimes
known as the gig economy.
1.4 There is no universally accepted definition of the term 'sharing
economy'. The sharing economy involves two parties entering into an
agreement for one to provide services and/or loan personal assets to the
other, for a payment. Traditionally this kind of activity would occur
between related parties and take place informally. The internet has helped
to formalise this activity and created opportunities for parties to earn a
regular income through these activities by making it easier for otherwise
unrelated parties to identify one another and to facilitate these types of
transactions. Many of these types of transactions are now facilitated
through an electronic platform.
1.5 Australia's sharing economy continues to grow and develop at a
significant pace. However, this growth has resulted in a transparency gap
because tax reporting systems currently do not adequately capture
information about transactions in this part of the economy. This creates
the risk of sellers not paying the right amount of tax. Lack of knowledge
and understanding about tax and associated obligations, recent
formalisation of this income generating work, the electronic
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Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
platform-seller relationship, and lax record keeping contribute to this
problem.
1.6 On the other hand, non-compliance can also be deliberate. In
this case it allows the black economy to thrive. Poor tax compliance,
whether deliberate or unintentional, provides an unfair advantage against
those who undertake similar activities in the economy and comply with
their tax obligations, leading to an uneven playing field.
The Black Economy Taskforce
1.7 Treasury's Black Economy Taskforce (the Taskforce) was
established in 2016 to develop an innovative, forward-looking,
multi-pronged policy response to combat the black economy in Australia,
recognising that these issues cannot be tackled by traditional law
enforcement measures alone.
1.8 To combat the tax compliance risks posed by the sharing
economy, the Taskforce's final report (the Report) recommended that a
compulsory reporting regime be implemented. A regime where the
operators of electronic platforms are required to report payments made to
their users, to the ATO and other government agencies as appropriate.
1.9 The Report found that without a reporting regime in place, it
would be difficult for the ATO to gain information on compliance of
sharing economy participants unless targeted audits were used. It found
that formalising reporting requirements would also send a clear signal to
sharing economy participants that in most cases payments would be
taxable. It also found that this would align Australia with international
best practice, as working with sharing economy electronic platforms
operating across multiple jurisdictions to bring them into domestic tax and
regulatory frameworks was identified as a matter of international
cooperation.
1.10 In response to the Report, the Government agreed to implement
measures to ensure the integrity of the tax system, including introducing a
third-party reporting regime requiring electronic platforms to report
information to the ATO for data-matching purposes. The measure Black
Economy - introducing a sharing economy reporting regime was included
in the 2019-20 MYEFO.
The Taxable Payments Reporting System
1.11 The sharing economy reporting regime will be implemented by
applying the TPRS to certain transactions undertaken through electronic
platforms.
1.12 The TPRS is located in Subdivision 396-B and is a data
matching framework that requires entities to report to the ATO
10
Sharing economy reporting regime
information about transactions that they are a party to that may have tax
consequences. The TPRS covers transactions in the building and
construction industry, supplies of cleaning, security or surveillance
services, supplies of information technology services and other
transactions outlined in the table in section 396-55.
1.13 The information about certain transactions provided to the ATO
under the TPRS helps identify entities that may not be meeting their tax
obligations.
Summary of new law
1.14 Schedule 1 to the Bill makes amendments to Subdivision 396-B
so that the TPRS applies to electronic platforms that facilitate supplies
from an entity to another entity.
1.15 Generally, if an electronic platform facilitates a supply
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 requirement will generally not apply if the
transaction only relates to a supply of goods where ownership of the
goods permanently changed, where title to real property is transferred, or
the supply is a financial supply. The requirement will also not apply if the
transaction occurs within the same consolidated or MEC group. Platforms
will also not be required to report transactions subject to another reporting
or withholding obligation where those transactions are reported to the
ATO.
Comparison of key features of new law and current law
New law Current law
Entities that operate electronic No equivalent.
distribution platforms are required to
report details about transactions
relating to supplies made through
those platforms, to the ATO.
Detailed explanation of new law
Entities required to report
1.16 The amendments require an entity that is the operator of an
electronic distribution platform to report information to the Commissioner
11
Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
about certain transactions that are made through that platform. [Schedule 1,
item 1, item 15 in the table in section 396-55 in Schedule 1 to the TAA 1953]
1.17 For the purposes of the reporting regime, electronic distribution
platform is defined by section 84-70 of the GST Act, disregarding
paragraph 84-70(1)(c) of that Act.
1.18 This means that an electronic distribution platform is a service
delivered by means of electronic communication (defined by the
Electronic Communications Act 1999). It includes platforms operating
over the internet; including through applications, websites, or other
software.
1.19 To meet the definition of an electronic distribution platform, a
platform must allow entities to make supplies available to an end-user
consumer through the platform. A service is not considered an electronic
distribution platform if it only advertises or creates awareness of possible
supplies, operates as a payment platform, or serves a communications
function.
1.20 The definition of an electronic distribution platform for the
purposes of the sharing economy reporting regime carves out
paragraph 84-70(1)(c) of the definition in the GST Act. This paragraph is
carved out as it could have the effect of removing an entity (that would
otherwise be an electronic distribution platform) from the regime if that
entity supplies any inbound intangible consumer supplies and none of
those supplies are made by means of electronic communications. The
reporting regime is intended to apply to a wide range of entities and
therefore the definition of an electronic distribution platform for this
purpose carves out an otherwise limiting factor that may undermine the
intent of the measure.
1.21 In the sharing economy context, an electronic distribution
platform can facilitate a transaction between two otherwise unrelated
parties. These platforms, at the most basic level, play the role of an
intermediary between the buyer and the seller. At a more complex level,
the platform operator can assume much of the inherent risk in the
transaction between the buyer and the seller, play a quality assurance role,
and ensure a seamless experience for the buyer and seller. In some cases,
the platform will also process the payment, however a platform will still
meet the definition of an electronic distribution platform if it uses a third-
party payment services provider for processing payments made in
connection with the platform. In most cases, there is no employer-
employee relationship between the seller and the platform operator.
Transactions that are required to be reported
1.22 Generally, the amendments require transactions to be reported to
the Commissioner if they involve the provision of consideration (within
the meaning of the GST Act) by a buyer to a seller for a supply made
12
Sharing economy reporting regime
through the platform by the seller. [Schedule 1, item 1, item 15 in the table in
section 396-55 in Schedule 1 to the TAA 1953]
1.23 Consideration includes any payment, act or forbearance that is
connected to a supply (see section 9-15 of the GST Act). In the sharing
economy platform context, consideration will usually be in the form of a
monetary payment made to the seller via the platform.
1.24 A supply is any form of supply whatsoever, including the supply
of goods, services, real property, or advice and information (see
section 9-10 of the GST Act). Transactions that only involve the sale of
goods or real property (the transfer of legal title to the goods or real
property) or financial supplies are not captured by the reporting regime.
Transactions that involve the rental of goods or real property that are
made through an electronic distribution platform are captured by the
reporting regime.
1.25 The supply must be a supply connected to the indirect tax zone
to be covered by the reporting regime. For the purposes of the reporting
regime, the meaning of indirect tax zone includes Australia's external
territories.
1.26 Among other examples, a supply of goods is connected to the
indirect tax zone if, broadly, goods are delivered in, made available in or
removed from the indirect tax zone (see subsections 9-25(1) to (3) of the
GST Act). A supply of goods is also connected with the indirect tax zone
if it is an offshore supply of low value goods to a consumer (see
subsection 9-25(3A) of the GST Act).
1.27 Similarly, cases where supplies of things other than goods or
real property are connected with the indirect tax zone include where the
supply is done in the indirect tax zone or the supply is made through an
enterprise a supplier carries on in the indirect tax zone, or the supply is
made to an Australian consumer (see subsection 9-25(5) of the GST Act).
Supplies a non-resident makes through an enterprise it does not carry on
in the indirect tax zone are generally not connected with the indirect tax
zone if they are made to a GST-registered Australian resident.
1.28 A supply must be made through the platform for the related
transaction to be captured within the scope of the TPRS. This ensures that
the requirement only applies to a transaction when the platform has a
greater level of involvement in the transaction than merely advertising the
opportunity, referring the buyer to the seller, or processing a payment.
1.29 Similar to other items in the table in section 396-55, transactions
where the seller and the operator of the platform are members of the same
consolidated or MEC Group, or where a portion of the consideration has
been withheld in accordance with the withholding regime in Division 12,
are not required to be reported. In the case of consolidated or MEC
Groups, intra-group transactions are generally disregarded for tax
13
Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
purposes. In the case of payments of consideration subject to Division 12
withholding obligations, these payments have existing reporting
obligations within the TAA 1953, so there is no need to include those in
the TPRS.
1.30 Transactions that only involve the supply of goods to a
consumer are not captured by this reporting regime. This includes supplies
that are composite supplies of goods (where the dominant part of the
supply is a supply of goods but the supply includes some other incidental
or ancillary elements). The platform will only be required to report details
about services provided in relation to those goods if the service was
performed through the operator's platform and constituted a separate
supply.
Reporting transactions
1.31 Operators are required to report information in the approved
form to the Commissioner either annually, or at such other times as the
Commissioner determines by legislative instrument. Operators must give
the report to the Commissioner on or before the 31st day after the reporting
period ends, or at another time as the Commissioner determines by
legislative instrument (see section 396-55).
1.32 The Commissioner may inform an operator in writing that it is
not required to report transactions made through its platform under the
third-party reporting regime, or that it is not required to report specified
classes of transactions (see subsections 396-70(1) to (3)). An operator
who is dissatisfied with a decision of the Commissioner to exercise or not
exercise this discretion may object under the procedures set out in
Part IVC of the TAA 1953. Merits review is available under Part IVC.
Any notice of a decision to exempt an operator generally or for a class of
transactions is not a legislative instrument. The Commissioner may also,
by legislative instrument, exempt a class of entity from reporting, either
generally or in respect of a specific class of transaction (see
subsection 396-70(4)).
1.33 The Commissioner may specify the information required to be
reported in the approved form, but all such information must relate to the
identification, collection, recovery, or reduction of a possible taxation
liability. It is expected that the Commissioner will typically request the
identifying information of the seller and the details of their transactions
made through the platform.
1.34 The general rules that apply to information that must be reported
under Division 396 will apply to the operators of electronic distribution
platforms. This means that if an operator has given the Commissioner a
report and they subsequently become aware that it contains a material
error, they must give the Commissioner an updated report within 28 days
of becoming aware of the material error (see section 396-75). A material
14
Sharing economy reporting regime
error includes omitting or misstating information where this would lead to
the incorrect calculation of an individual's tax liability. Similarly, if an
operator has failed to give a report, or a corrected report, to the
Commissioner by the time required, an administrative penalty applies (see
subsection 286-75(1)).
1.35 An administrative penalty also applies if a report includes any
false or misleading statements (see subsection 284-75(1)). A statement in
this case includes submitting information about transactions required to be
reported under the TPRS framework in the approved form. However, an
administrative penalty will not apply where the operator can show it took
reasonable care to ensure the accuracy of the information provided (see
subsection 284-75(5)). An operator taking reasonable care must generally
give the appropriate serious attention to complying with their obligations
under taxation law. The Commissioner has published guidance on how the
ATO applies these terms.
Application and transitional provisions
1.36 The amendments contained in Schedule 1 apply from
1 July 2022 for transactions in relation to the supply of taxi travel (within
the meaning of the GST Act) and short-term accommodation; and
1 July 2023 for all other transactions. [Schedule 1, item 2]
1.37 The different application dates are warranted because data
matching protocols already exist between the ATO and the operators of
platforms that commonly facilitate taxi travel (this includes ride sharing
services see Uber V.B. v Federal Commissioner of Taxation
[2017 FCA 110]) and short-term accommodation transactions. Therefore,
these entities do not need a lengthy lead time to ensure compliance.
15
Chapter 2
Transitional provisions relating to the
repeal of the Superannuation (Resolution
of Complaints) Act 1993
Outline of chapter
2.1 Schedule 2 to the Bill amends the AFCA Act to facilitate the
closure and any transitional arrangements associated with AFCA
replacing the SCT.
2.2 Schedule 2 amends the AFCA Act to provide for the transfer of
records and documents from the SCT to ASIC, includes an express power
for the Federal Court to remit cases back to AFCA instead of the SCT,
and introduces a rule-making power to allow the Minister to prescribe
other matters of a transitional nature.
Context of amendments
2.3 The SCT is a statutory tribunal established under the
Superannuation Complaints Act which considers complaints about
superannuation.
2.4 In 2017, the Ramsay Review found that the existence of multiple
financial services external dispute resolution schemes with overlapping
jurisdictions means resulted in difficulties in achieving comparable
outcomes for consumers with similar complaints. The Ramsay Review
also found long-standing problems with the arrangements for resolving
superannuation complaints in the SCT.
2.5 In the Government's response to the Ramsay Review, the
Government announced the creation of a new framework for dispute
resolution with a 'one stop shop' external dispute resolution scheme
which will be known as AFCA. The purpose is to improve outcomes for
consumers in the financial system.
2.6 With the introduction of the AFCA Act, AFCA replaced the
SCT, as well as other bodies such as the FOS, and the Credit and
Investments Ombudsman. Since 1 November 2018, AFCA has been the
external dispute resolution body for complaints against financial firms, as
well as superannuation disputes. It is a company limited by guarantee. The
AFCA Act received Royal Assent on 5 March 2018.
17
Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
2.7 Under Schedule 3 to the AFCA Act, the Superannuation
Complaints Act along with consequential amendments are to be repealed
following a proclamation by the Treasurer or the day after 4 years of the
commencement of the AFCA Act. This latter date is the 5 March 2022.
2.8 In the 2019-20 Budget, the Government announced it would
provide an additional $2.3 million over three years from 2020-21 to ASIC
for the SCT to resolve outstanding complaints by 31 December 2020, after
which the SCT is intended to cease operations. This funding would also
assist ASIC with any other administrative requirements needed to
facilitate the wind down of the SCT.
Summary of new law
2.9 Schedule 2 to the Bill amends the AFCA Act to assist in the
closure of the SCT and to efficiently facilitate any transitional
arrangements associated with moving the handling of superannuation
complaints from the SCT to AFCA.
2.10 Schedule 2 amends the AFCA Act to insert a provision dealing
with the transfer of records and documents from the SCT to ASIC
following the commencement of the Schedule 3 to the AFCA Act. These
records and documents are taken to be protected information for the
purposes of section 127 of the ASIC Act.
2.11 Schedule 2 also includes a power for the Federal Court to remit
cases back to AFCA, where ordinarily, these would be remitted to the
SCT.
2.12 Schedule 2 also introduces a rule-making power to the
AFCA Act to allow the Minister to prescribe matters of a transitional
nature.
Comparison of key features of new law and current law
New law Current law
The AFCA Act includes a rule- No equivalent.
making power for prescribing matters
of a transitional nature relating to the
closure of the SCT.
Records and document previously No equivalent.
held by the SCT are transferred to
ASIC. Such records and documents
are protected information.
In making an appeal determination, No equivalent.
the Federal Court may remit cases
18
Transitional provisions relating to the repeal of the Superannuation (Resolution of Complaints)
Act 1993
New law Current law
back to AFCA to remake a decision,
where originally, these would be
remitted back to the SCT.
Detailed explanation of new law
2.13 Schedule 2 to the Bill amends the AFCA Act to assist in the
closure of the SCT and to efficiently facilitate any transitional
arrangements associated with moving the handling of superannuation
complaints from the SCT to AFCA.
Transfer of records and documents to ASIC
2.14 The repeal of the Superannuation Complaints Act will occur
from the commencement of Schedule 3 to the AFCA Act. These
provisions are inserted into Schedule 3 and therefore will commence in
line with repeal of the Superannuation Complaints Act. This will signify
the closure of the SCT.
2.15 Upon the closure of the SCT, ASIC becomes the administrator
of any document in possession of the SCT at the time of closure.
[Schedule 2, item 2, subsection 33(2) of Schedule 3 to the AFCA Act]
2.16 In their role as administrator, ASIC will respond to any freedom
of information requests, as well as prepare and disclose relevant
documents to AFCA or the Federal Court where necessary for the
purposes of AFCA or the Federal Court undertaking their functions.
2.17 Prior to the SCT's closure, outstanding cases that are not able to
be resolved will be transferred to AFCA for resolution. Subsequent
disclosure from ASIC to AFCA may be as a result of a request by AFCA
for information relating to those outstanding cases following the closure
of the SCT.
2.18 Under the Superannuation Complaints Act, a party may appeal
to the Federal Court on questions of law from a determination made by
the SCT. Disclosure to the Federal Court from ASIC will be in the course
of this appeal process. Where the request for information would have
previously gone to the SCT, it will now be directed to ASIC for
information regarding that original determination.
2.19 In disclosing this information, ASIC must comply with the
principles contained in the Privacy Act 1988 and section 127 of the
ASIC Act. Under this section, disclosure to AFCA and the Federal Court
for the purposes of their role and function is considered to be an
'authorised disclosure.'
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Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
2.20 In practice, the transfer of records or documents will not include
the physical transfer of documents from the SCT to ASIC. These
documents are already physically held by ASIC as the SCT is staffed by
members of the staff of ASIC who have been made available to the SCT
under section 62 of the Superannuation Complaints Act. The systems and
storage used by the SCT for their documents and records are the same
systems and storage as ASIC. Therefore, the existence of these provisions
are operational for ASIC to be transferred legal responsibility of these
documents or records following the closure of the SCT.
2.21 This applies to any record or document that was in the SCT's
possession immediately before the closure of the SCT. Possession applies
broadly to include any:
• member of the SCT; or
• member of the staff of ASIC who had been made available to
the SCT under section 62 of the Superannuation
Complaints Act.
[Schedule 2, item 2, subsection 33(1) of Schedule 3 to the AFCA Act]
2.22 In considering what information is to be transferred to ASIC, the
phrase 'records or documents' is an intentionally broad phrase to capture
all electronic and physical documents currently held by the SCT. These
may include historical documents. However, nothing in the transfer of
document is intended to amount to disclosure for the purposes of waiving
legal professional privilege.
2.23 The words 'record' and 'document' are defined in section 25 of
the Acts Interpretation Act 1901.
2.24 Record is defined to include information stored or recorded by
means of a computer.
2.25 Document is defined in as any record of information, and
includes:
• anything on which there is writing; and
• anything on which there are marks, figures, symbols or
perforations having a meaning for persons qualified to
interpret them; and
• anything from which sounds, images or writings can be
reproduced with or without the aid of anything else; and
• a map, plan, drawing or photograph.
2.26 Despite the transfer, these documents or records continue to be
Commonwealth records for the purposes of the Archives Act 1983.
Therefore, following the transfer, ASIC will have responsibility for the
disposal and archiving of these documents in line with their
20
Transitional provisions relating to the repeal of the Superannuation (Resolution of Complaints)
Act 1993
responsibilities under the Archives Act 1983. This position is clarified in
the note to section 33 of Schedule 2.
Protected information
2.27 Schedule 2 to the Bill ensures that the transferred records or
documents will be considered 'protected information' for the purposes of
section 127 of the ASIC Act. [Schedule 2, item 2, subsection 33(3) of Schedule 3 to
the AFCA Act]
2.28 This provision safeguards against any unauthorised disclosure of
sensitive and personal information that may be contained in the
transferred documents and records. These safeguards reflect the privacy
and confidentiality provisions contained in the Superannuation
Complaints Act which prohibit disclosure of sensitive information.
2.29 Section 127 of the ASIC Act requires that ASIC will take all
reasonable measures to protect information that has been classified as
'protected information' from unauthorised use or disclosure. Disclosure to
the Federal Court and AFCA are considered to be an 'authorised
disclosure'.
2.30 However, a document or record that has already been lawfully
made available to the public will not be covered by section 127 of the
ASIC Act. [Schedule 2, item 2, subsection 33(3) of Schedule 3 to the AFCA Act]
2.31 The effect of this is that a document that is already public (such
as an annual report) will not have the same confidentiality requirements as
personal or sensitive information.
Federal Court power
2.32 Schedule 2 includes an express provision for appeals of SCT
determinations to the Federal Court following the repeal of the
Superannuation Complaints Act. [Schedule 2, item 2, subsection 34(1) of
Schedule 3 to the AFCA Act]
2.33 Under the Superannuation Complaints Act, a party may appeal
to the Federal Court on questions of law from a determination made by
the SCT. The Federal Court may hear and determine the appeal and make
an order as it thinks appropriate. The same appeal process is available for
determinations made by AFCA under the AFCA Act.
2.34 The orders that may be made by the Federal Court on an appeal
include an order affirming or setting aside the determination of the SCT or
an order remitting the matter to be determined again by the SCT in
accordance with the directions of the Federal Court.
2.35 Without limiting the powers of the Federal Court, the provision
provides that the Federal Court may make an order remitting the matter
back to AFCA where this would have ordinarily been remitted back to the
21
Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
SCT. The determination will then be made by AFCA in accordance with
the directions of the Federal Court. [Schedule 2, item 2, subsection 34(2) of
Schedule 3 to the AFCA Act]
Transitional Rules
2.36 Schedule 2 provides that the Minister may, by legislative
instrument, make rules of a transitional nature (including prescribing any
saving or application provisions) relating to the repeal of Schedule 3 to the
AFCA Act. [Schedule 2, item 2, subsection 35(1) of Schedule 3 to the AFCA Act]
2.37 A broad rule-making power provides flexibility for the
Government to address any additional issues that emerge to accommodate
the closing of the SCT, and the repeal of the Superannuation Complaints
Act.
2.38 The rules will provide for transitional issues such as providing
appropriate operational requirements that will assist AFCA with the
handling of the SCT cases and may provide further specificity of ASIC's
role as administrator following the closure of the SCT.
2.39 Any such rules would be a legislative instrument under section 8
of the Legislation Act. Therefore, these rules will be subject to the
disallowance process which will allow for appropriate parliamentary
oversight and scrutiny (section 42 of the Legislation Act). The rules will
also be subject to sunsetting (section 50 of the Legislation Act).
2.40 To avoid doubt, the rules may not do the following:
• create an offence or civil penalty;
• provide powers of:
- arrest or detention; or
- entry, search or seizure;
• impose a tax;
• set an amount to be appropriated from the Consolidated
Revenue Fund under an appropriation the AFCA Act;
• directly amend the text of the AFCA Act.
[Schedule 2, item 2, subsection 35(2) of Schedule 3 to the AFCA Act]
Application and transitional provisions
2.41 The transitional measures in Schedule 2 commence on the day
after the Bill receives Royal Assent.
22
Transitional provisions relating to the repeal of the Superannuation (Resolution of Complaints)
Act 1993
2.42 The provisions will be inserted into the AFCA Act on the
commencement date. After they are inserted into the AFCA Act, they will
only commence when Schedule 3 to that Act commences.
2.43 Commencement of Schedule 3 will be following a proclamation
by the Treasurer or the day after 4 years of the commencement of the
AFCA Act. This latter date is the 5 March 2022.
23
Chapter 3
Removing the self-education expenses
threshold
Outline of chapter
3.1 Schedule 3 to the Bill removes the $250 non-deductible
threshold for work-related self-education expenses by repealing
section 82A of the ITAA 1936.
3.2 Removing the $250 non-deductible threshold reduces
compliance costs for individuals claiming self-education expense
deductions and simplifies the tax return process.
Context of amendments
3.3 In December 2020, the Government consulted on the removal of
the $250 non-deductible self-education expenses threshold as part of a
discussion paper, Education and training expense deductions for
individuals (p. 10).
3.4 Stakeholders unanimously supported the removal of the
$250 threshold as it no longer serves its original purpose and adds
regulatory costs and complexity for individuals.
3.5 The Government announced the removal of the
$250 work-related self-education expense threshold in the 2021-22
Budget.
Operation of existing law
3.6 Self-education expenses are deductible under section 8-1 of the
ITAA 1997 where they have a sufficient connection to the individual's
current income-earning activities. A sufficient connection exists if the
study enables the individual to maintain or improve required skills or
knowledge for their employment or is likely to lead to an increase in the
individual's income from their current income-earning activities.
$250 self-education expense threshold
3.7 In certain circumstances, section 82A of the ITAA 1936 requires
individuals to reduce their claim for self-education expenses by $250.
25
Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
3.8 Where section 82A of the ITAA 1936 applies, the total
allowable deduction for self-education expenses under section 8-1 of the
ITAA 1997 cannot be greater than the amount by which the net amount of
'expenses of self-education' exceeds $250. In practice, this means only
the excess of the self-education expenses over $250 may be considered for
deduction under section 8-1 of the ITAA 1997.
3.9 Section 82A of the ITAA 1936 applies to expenses of
self-education necessarily incurred by an individual for or in connection
with an organised course of education provided by a school, college or
university, on a full or part time basis.
3.10 An individual may have expenses that are not deductible under
section 8-1 of the ITAA 1997 that are still considered 'expenses of
self-education' for the purpose of the section 82A calculation (e.g.,
childcare costs related to attendance at self-education activities). These
self-education expenses count towards (reduce) the $250 threshold but
cannot reduce the amount by more than $250.
3.11 'Expenses of self-education' do not include student contribution
amounts or amounts in repayment of a debt specified in subsection 82A(2)
of the ITAA 1936. These same amounts are also not deductible under the
ITAA 1997 (see section 26-20 of the ITAA 1997).
Self-education expenses and fringe benefits tax
3.12 Where an employer provides a fringe benefit comprising
work-related self-education expenses to an employee, the employer can
reduce the taxable value of the fringe benefit by applying the relevant
'otherwise deductible' rule for the fringe benefit in section 19, 24, 37, 44
or 52 of the FBTAA 1986.
3.13 The 'otherwise deductible' rule allows the employer to reduce the
taxable value of the fringe benefit by the amount of the income tax
deduction the employee would otherwise have been entitled to claim had
the employee incurred (and not been reimbursed for) the relevant costs.
3.14 The 'otherwise deductible' rule disregards section 82A of the
ITAA 1936 for the purpose of calculating an employee's hypothetical
deduction to determine any reduction in the taxable value of the fringe
benefit.
3.15 An employee cannot claim a deduction for work-related
self-education expenses where their employer pays or reimburses the
expense (i.e., provides an expense payment fringe benefit) (see
section 51AH of the ITAA 1936).
26
Removing the self-education expenses threshold
Background to the existing law
3.16 The $250 non-deductible threshold for self-education was
introduced in 1975 alongside a concessional tax rebate for expenditure on
self-education. As the concessional rebate was $250, the non-deductible
threshold was set at $250 to ensure only education expenses above that
amount could qualify for a deduction. This approach was designed to
prevent individuals from claiming both the tax rebate and a tax deduction
for the same expenses.
3.17 The concessional rebate was repealed in 1985 but the
$250 non-deductible threshold was retained. As a result, the
$250 threshold no longer serves its original purpose of preventing
overlapping claims.
Summary of new law
3.18 Schedule 3 to the Bill removes the $250 non-deductible
threshold for work-related self-education expenses. Individuals must
determine the deductibility of their self-education expenses by reference
to section 8-1 of the ITAA 1997, as affected by other general deduction
limitations and any relevant specific deductions.
Detailed explanation of new law
3.19 Schedule 3 to the Bill removes the $250 non-deductible
threshold for self-education expenses. The removal of this threshold
reduces compliance costs for individuals calculating their work-related
self-education expense deductions. [Schedule 3, item 26, section 82A of the
ITAA 1936]
Determining the deductibility of self-education expenses
3.20 Following the amendments, individuals continue to determine
the deductibility of their self-education expenses by reference to
section 8-1 of the ITAA 1997, as affected by other general deduction
limitations and any relevant specific deductions.
3.21 Individuals can claim deductions for self-education expenses
under section 8-1 of the ITAA 1997 if:
• the expense is incurred in gaining or producing assessable
income;
• the expense is not private, domestic, or capital in nature; and
• the deduction is not prevented by a provision of that Act.
27
Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
3.22 The repeal of section 82A of the ITAA 1936 does not affect the
types of self-education expenses that are deductible under section 8-1 or
other provisions of the ITAA 1997. For example, the costs of textbooks,
stationery, and professional journals (among other expenses) are still
deductible, while certain student contributions and debt repayment
amounts referred to in section 26-20 of the ITAA 1997 are still not
deductible (see paragraph 3.10). This is because, prior to the repeal, the
tax law limited the amount (not the type) of deductions that could be
claimed for self-education expenses.
3.23 The amendments reduce compliance costs for individuals
because they no longer need to reduce their self-education expenses
by $250 before claiming a deduction under section 8-1 of the ITAA 1997.
In practice, this means individuals must continue to maintain records of
their deductible self-education expenses. However, they no longer need to
keep records of any non-deductible self-education expenses for tax
purposes that, prior to the amendments, were first offset against the
$250 non-deductible self-education threshold (Example 3.1).
Example 3.1 Deduction for self-education expenses
Anna is a part-time social worker who is undertaking additional
training related to her employment. Anna is eligible to deduct expenses
associated with her training, including tuition fees and textbooks,
which total $5,000 for the income year. Anna has also incurred $150 in
non-deductible childcare expenses and $150 in non-deductible travel
expenses while attending her training activities.
With the repeal of the $250 non-deductible self-education threshold,
Anna is able to claim a deduction of $5,000 but does not need to
calculate or keep records of her non-deductible expenses to offset the
$250 reduction to complete her income tax return.
Prior to the repeal of the threshold, Anna was required to reduce the
amount of her deduction by $250. As her non-deductible expenses
fully offset the $250 reduction, Anna would still have been able to
claim a deduction of $5,000 but would also have had to calculate and
keep records of her non-deductible expenses for the required period
after receiving her assessment.
Consequential amendments
Income Tax Assessment Acts 1936 and 1997
3.24 Schedule 3 to the Bill repeals references to section 82A and 'of
this Act' in other provisions of the ITAA 1936. These references are
redundant following the repeal of section 82A of the ITAA 1936.
[Schedule 3, items 18 to 25 and 27, paragraphs 21A(3)(b), 26AJ(2)(b), 26AJ(2)(d) and
26AJ(3)(b) and subsection 109CA(5) of the ITAA 1936]
28
Removing the self-education expenses threshold
3.25 Schedule 3 to the Bill also repeals references to section 82A in
the ITAA 1997 as they are no longer needed. [Schedule 3, items 28 to 32,
section 12-5 of the ITAA 1997]
Fringe Benefits Tax Assessment Act 1986
3.26 Schedule 3 repeals references to section 82A in the
FBTAA 1986 as they are no longer needed. [Schedule 3, items 1, 4, 6, 8 to 10,
12, 14, 16, paragraphs 19(1)(b), 24(1)(b), 24(1)(ba), 37(b), 37(c), 44(1)(b), 44(1)(ba),
52(1)(b) and 52(1)(ba) of the FBTAA 1986]
3.27 Consequently, Schedule 3 reinserts a reference to the
ITAA 1936 into sections 19, 24, 44 and 52 of the FBTAA 1986 to ensure
they continue to refer to deductions otherwise allowable under the
ITAA 1936 or 1997. [Schedule 3, items 2, 3, 5, 7, 11, 13, 15, 17,
paragraphs 19(1)(b), 19(1)(ba), 24(1)(b), 24(1)(ba), 44(1)(b), 44(1)(ba), 52(1)(b) and
52(1)(ba) of the FBTAA 1986]
3.28 The repeal of the $250 non-deductible self-education expenses
threshold does not affect the operation of the 'otherwise deductible' rule
in sections 19, 24, 37, 44 and 52 of the FBTAA 1986. Prior to the repeal
of section 82A of the ITAA 1936, employers would calculate the amount
'otherwise deductible' by reference to the amount of the deduction
allowable to the employee but for that section (see paragraph 3.12).
Accordingly, with the repeal of section 82A of the ITAA 1936, the
references in the FBTAA 1986 to that section become redundant.
Application and transitional provisions
Commencement
3.29 Schedule 3 commences on the first 1 January, 1 April, 1 July or
1 October to occur after the day the Bill receives the Royal Assent.
[Clause 2, table item 1]
Application
3.30 The amendments to the ITAA 1936 and 1997 in Schedule 3
apply to assessments for the 2022-23 income year and later income years.
[Schedule 3, subitem 33(1)]
3.31 The amendments to the FBTAA 1986 in Schedule 3 apply to the
FBT year starting on 1 April 2023 and to later FBT years. [Schedule 3,
subitem 33(2)]
3.32 The amendments to the FBTAA 1986 remove redundant
references to section 82A of the ITAA 1936 following the repeal of that
section. These amendments apply from the start of the first full FBT year
29
Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
following the application of amendments to the ITAA 1936 and 1997 to
prevent unintended practical impacts or compliance costs for employers.
30
Chapter 4
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Schedule 1 - Sharing economy reporting regime
4.1 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
4.2 Schedule 1 to the Bill amends Schedule 1 to the TAA 1953 to
require electronic platform operators to provide information on
transactions facilitated through the platform to the ATO. This measure
implements a recommendation of the report of the Black Economy
Taskforce.
Human rights implications
4.3 The amendments made by this Schedule engage the prohibition
on arbitrary or unlawful interference with privacy contained in Article 17
of the ICCPR, as operators of electronic platforms will need to provide a
range of personal information to the Commissioner about individuals that
they collect in the course of their business.
4.4 The obligation for operators to report this information is
compatible with the prohibition as it is neither arbitrary nor unlawful. The
objective of the requirement to report this information is to ensure that
sellers on these electronic platforms are paying the correct amount of tax
by gathering information about potential tax liabilities.
4.5 Further, reporting regimes such as this provide more certainty
and consistency of treatment for entities than the alternative, where the
Commissioner collects information under his or her general information
gathering powers on an ad-hoc basis. The information reported by
operators would typically be limited to information that they already hold
having collected it in the ordinary course of their business. Taxpayer
information held by the ATO is subject to strict confidentiality rules that
prohibit tax officials from making records or disclosing this information
unless a specific legislative exemption rule applies.
31
Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
4.6 The Commissioner may only require platforms to report
information that relates to the identification, collection or recovery of a
possible tax related liability as well as the identity of the taxpayer to
which the tax related liability may arise.
4.7 The Commissioner retains flexibility to exempt certain entities
from the reporting regime, for example to avoid double reporting or where
reporting would be impractical. The Commissioner can also vary
timeframes for reporting to ensure the compliance burden on operators of
platforms is minimal.
Conclusion
4.8 This Schedule is consistent with Article 17 of the ICCPR on the
basis that its engagement of the right to privacy will neither be unlawful
nor arbitrary. To this extent, this Schedul complies with the provisions,
aims and objectives of the ICCPR.
Schedule 2 - Transitional provisions relating to the repeal of the
Superannuation (Resolution of Complaints) Act 1993
4.9 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.
Overview
4.10 Schedule 2 to the Bill amends the AFCA Act to facilitate the
closure and any transitional arrangements associated with AFCA
replacing the SCT.
4.11 Schedule 2 to the Bill amends the AFCA Act to provide for the
transfer of records and documents from the SCT to ASIC, includes an
express power for the Federal Court to remit cases back to AFCA instead
of the SCT, and introduces a rule-making power to allow the Minister to
prescribe matters of a transitional nature.
Human rights implications
The right to protection from arbitrary or unlawful interference with
privacy and reputation
4.12 This Schedule engages, or may engage, the right to privacy
which is contained in Article 17 of the ICCPR.
4.13 Article 17 of the ICCPR contains the right to protection from
arbitrary or unlawful interference with privacy and reputation. The United
Nations Human Rights Committee has not defined 'privacy' but it is
generally understood to comprise of a freedom from unwanted and
32
Statement of Compatibility with Human Rights
unreasonable intrusions into activities that society recognises as falling
within the sphere of individual autonomy. The collection and sharing of
information (public or otherwise) may be considered to engage and offend
the right to privacy.
4.14 The right in Article 17 may be subject to permissible limitations,
where these limitations are authorised by law and are not arbitrary. In
order for an interference with the right to privacy to be permissible, the
interference must be authorised by law, be for a reason consistent with the
ICCPR and be reasonable in the particular circumstances. The United
Nations Human Rights Committee has interpreted the requirement of
'reasonableness' to imply that any interference with privacy must be
proportional to the end sought and be necessary in the circumstances of
any given case.
4.15 Where records and documents are transferred to ASIC following
the closure of the SCT, these records and documents may contain personal
or sensitive information relating to individuals who bought complaints to
the SCT. This information is received as 'protected information' under
section 127 of the Australian Securities and Investments Act 2001 which
prohibits disclosure and unauthorised use unless in specified
circumstances.
4.16 Prior to the SCT's closure, outstanding cases that were not able
to be resolved were transferred to AFCA for resolution. Disclosure from
ASIC will generally be from a request by AFCA for any information
relating to these outstanding cases.
4.17 Under the Superannuation (Resolutions of Complaints)
Act 1993, a party may appeal to the Federal Court on questions of law
from a determination made by the SCT. Disclosure to the Federal Court
from ASIC will be in the course of this appeal process. Where the request
for information would have previously gone to the SCT, it will now be
directed to ASIC for information relating to the original determination.
4.18 Where ASIC does disclose this information, either to AFCA or
the Federal Court, ASIC must comply with disclosure and retention
principles contained in the Privacy Act 1988 and section 127 of the
Australian Securities and Investments Act 2001. Under this section,
disclosure to AFCA and the Federal Court for the purposes of their role
and function is considered an 'authorised disclosure'.
4.19 Based on the above factors, if there is interference with the right
to privacy this is considered to be permissible as it is reasonable,
proportionate and necessary to achieve the legitimate objective of
maintaining consumer confidence in the financial services and consumer
credit industry. Therefore, to the extent that Schedule 2 engages the right
to privacy, it is consistent with Article 17 of the ICCPR as it subject to
limitations that are authorised by law and are not arbitrary.
33
Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
Conclusion
4.20 This Schedule is compatible with human rights as it does not
raise any human rights issues
Schedule 3 - Removing the self-education expenses threshold
4.21 Schedule 3 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
4.22 Schedule 3 to the Bill reduces the compliance costs for
individuals claiming work related self-education expenses by repealing
the $250 non-deductible threshold for work-related self-education
expenses in section 82A of the ITAA 1936.
4.23 Individuals must determine the deductibility of their
self-education expenses by reference to section 8-1 of the ITAA 1997, as
affected by other general deduction limitations and any relevant specific
deductions.
Human rights implications
4.24 Schedule 3 to the Bill does not engage any of the applicable
rights or freedoms.
Conclusion
4.25 Schedule 3 to the Bill is compatible with human rights as it does
not raise any human rights issues.
34
Attachment A
Extracts from the final report of the Black
Economy Taskforce
Executive Summary
Following an initial investigation by the Board of Taxation, supported by Treasury and
the ATO, the Government (in December 2016) established this Taskforce to develop
an innovative, forward-looking and genuinely whole-of-government strategy to combat
the black economy.
The black economy is a significant, complex and growing economic and social
problem. In our opinion, it could have increased in size by up to 50 per cent since
2012.
The costs it entails are not only financial in nature (lower tax revenues and higher
welfare costs), but also societal. The black economy is manifestly unfair, allowing
some to play by their own rules and penalising businesses, employees and consumers
who do the right thing. Under cover of the black economy, vulnerable workers are
exploited, criminal groups flourish and social capital and trust are undermined.
The black economy is not standing still, but rapidly shifting and evolving in step with
wider economic, technological and social changes. It is a growing problem which, if
not dealt with, can develop a dangerous momentum of its own: a 'race-to-the-bottom'
which we are already seeing in particular areas.
In 2012, the Australian Bureau of Statistics estimated that the black economy equated
to 1.5 per cent of GDP, with the illicit drug industry adding a further 0.4 per cent of
GDP. This estimate is now outdated. We consider that the black economy could be as
large as 3 per cent of GDP (roughly $50 billion) today, given the trends we identify in
this Report.
A sense of urgency is needed from policymakers, leaving behind business-as-usual
approaches from the past. A new strategy and commitment is required: one which
addresses underlying causes, not symptoms, while keeping regulatory burdens low; one
which goes beyond tax; and one which breaks down agency silos and embraces joint
action and the intelligent use of data and analytics. This Taskforce was a genuinely
whole-of-government undertaking, bringing together 20 Commonwealth agencies.
This agenda has a clear purpose and objective: to make our society both fairer and
more equitable by creating a level playing field. To the extent that this yields a revenue
dividend, the Government's capacity to fund needed services (or provide tax relief or
lower deficits) will be greater.
Combatting the black economy is not just a matter for governments. We all need to be
part of the solution. We need a new social contract: a renewed commitment from the
35
Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
business community and wider public to fight the black economy. Our hope is that our
work, including our public hearings and consultations, has helped start an overdue
national conversation.
In the time since the Interim Report in March, the Government announced the adoption
of two of our key recommendations in the 2017-18 Budget.
In late May and throughout June, we conducted a national roadshow, holding public
hearings and industry roundtables in every state capital city and the regional centres of
Bathurst, Mildura and the Gold Coast. We have received 149 submissions from
businesses, unions, community organisations, state and territory governments and
members of the public. The Taskforce Chairman has held over 140 bilateral meetings
with stakeholder representatives. In August, we released a detailed consultation paper
containing over 50 ideas.
Perhaps as a result of this review, we have been told by tax and law enforcement
authorities that public reporting and enforcement of black economy offences has
increased.
What we have learned
Our engagement with the public has deepened our understanding of the black
economy, the factors that drive it and, critically, the wider societal damage it causes.
We have benefitted enormously from the insights and expertise of our private sector
Reference Group and Inter-Departmental Committee of Commonwealth officials.
In particular, we have learned the following:
• The black economy is more diverse, more complex and influenced by a wider
range of factors than we first realised. While the black economy has always
been with us, it is constantly changing form and focus as the commercial,
economic, technological and social landscape shifts. A decade ago, the sharing
economy was in its infancy, phoenixing was not as prominent as it is today,
supply chains were under less pressure, Australian Business Number fraud and
identity fraud were less of a concern and the criminal face of the black economy
was very different. There has been a noticeable increase in white collar crime.
• The black economy is an endemic cultural problem. It is supported by values
and assumptions that participation in the black economy is a 'victimless crime',
that 'everyone does it'. We are seeing it become more entrenched with such views
spreading through families and communities including through social media.
• The adoption, up-take and spread of new business models in the economy,
while a positive development, facilitates black economy activities when our policy
and regulatory frameworks fail to keep pace. The shift of contracting into new
sectors (including human services), the sharing or gig economy, the expansion of
domestic services, the fragmentation and growing complexity of supply chains,
36
Extracts from the final report of the Black Economy Taskforce
the growing sophistication and cross-border nature of criminal activity and
financial innovations (including the use of cryptocurrencies) are all cases in point.
• That the traditional view which placed the 'cash' and 'black' (or criminal) parts
of the problem in different categories, leaving the former to tax authorities and the
latter to law enforcement, is outmoded. Modern criminal networks are more
sophisticated and business-savvy than ever, pursuing opportunities wherever they
arise, including the legal economy. Indeed, this is a factor behind the growth of
the black economy in recent years. Criminal activities do not respect the silos of
government organisation so any government response needs to be flexible and
coordinated.
• More regulation is not the answer. Business after business has told us that
regulations tie legitimate operators up in complexity and red-tape, while being
completely evaded by hardened black economy operators. Our responses must be
more intelligent and targeted than this, including employing the smart
technologies we are seeing in the private sector. It is not beyond us to reduce red-
tape for 'low-risk' businesses while focussing our enforcement efforts on the
minority doing the wrong thing. In our consultations, the value of visible
enforcement has been a consistent message.
• The exploitation of vulnerable employees is widespread and may be growing.
This manifests itself in the underpayment of labour, the denial of basic conditions
and in some cases modern slavery.
• There is anger in the community about the unfairness of the black economy.
Honest small businesses are sick of being undercut by competitors who have an
unfair advantage, whether it is paying cash wages to employees, using illegal
migrant workers or engaging in sham contracting. Honest employees suffer as
well. While community frustration toward multinational firms has been
acknowledged by the policy community, in part because it has a natural focus, the
black economy's injustices and unfairnesses, while no less real, lack the same
profile.
• It is wrong to tar the entire small business community with the black economy
brush. The majority of small businesses and tradespeople do the right thing.
Equally, we should avoid the temptation to paint consumers and employees as
innocent victims in all cases. Some employees, including high-end hospitality
staff, will not work for anything other than cash wages. Some consumers demand
discounts from tradespeople. This is not to deny, of course, the situation of
vulnerable employees in particular, who are, in many cases, subject to
mistreatment.
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Our strategy
In this Report, we outline a clear strategy for dealing with the black economy. We
recognise that this must:
• Address the drivers rather than the symptoms of the black economy. We must
focus on incentives, deterrents and measures which will limit opportunities for
participation in the black economy across the board. Strengthening identity
regimes (for individuals and businesses), transparency (for contractors and sharing
economy operators), moving to a near non-cash world, visible enforcement,
education and 'hardwiring' government all have a role to play.
• Be practical and implementable, while avoiding increasing regulatory burdens,
and tailored and targeted. We need to recognise different degrees of culpability:
there are many who innocently participate in the black economy (for example,
occasionally paying cash for childcare); others deliberately flout the law; and still
others find themselves trapped (for example, exploited employees).
• Include short-term, urgent measures, addressing the most pressing concerns, but
also early actions which provide a foundation for later interventions. We set out an
indicative timetable for implementation of our key recommendations.
• Our efforts need to be sustained. We need to leave a lasting institutional legacy, to
ensure this problem receives the attention it deserves in future years. This will
require changes to the machinery of government, but also new patterns of
cooperation with the states and territories and other countries.
Our strategy, at the highest level, is to:
1. Move people and businesses out of cash and into the banking system, which
makes economic activity more visible, auditable and efficient (Chapter 3 in this
Report).
2. Strengthen the identity underpinnings of the banking system by introducing a
more reliable, safe and modern individual identity credential (initially for
interactions with the Commonwealth Government) and reforming the Australian
Business Number system (Chapter 4).
3. Improve agencies' ability to enforce existing laws by promoting better sharing
of data and more modern data analytics (Chapter 5). At the same time, closing
data gaps by extending our tax reporting systems and promoting more data
sharing with state governments (Chapters 6 and 15).
4. Improving Commonwealth agencies' effectiveness by working more closely with
other governments (state, local and international) and business organisations,
community groups and unions (Chapters 11 and 15).
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5. Tackling behaviours directly by strengthening incentives for consumers and
small businesses including an amnesty and benefits for small businesses which
adopt non-cash business models (Chapters 3 and 7).
6. Supporting this with a dedicated social norms agenda, including education,
public awareness and new-business strategies (Chapter 11).
7. Making enforcement more visible, better tailored to the offence and more
effective (graduated penalties, greater use of civil law and multi-agency action).
Targeting particular problem areas, including phoenixing, sham contracting, visa
abuses and vulnerable workers. In the criminal area, adopting a more strategic
approach on illegal tobacco and gambling (Chapters 8, 10, 12, 13 and 14) and
disrupting the proceeds of crime.
8. Pursuing a new responsible supply chain agenda, which is an emerging
integrity issue, in both the public and private sectors (Chapter 9).
9. Disrupt crime and illegality, the sharp end of the black economy, including
illegal tobacco and unregulated gambling (Chapters 12, 13 and 14).
10. Institutional changes to strengthen, modernise and better marshal our future
efforts on the black economy (Chapter 16).
In our Interim Report, we pointed out that, in many areas, relevant work is being done
by other reviews. These are looking at the treatment of migrant workers, phoenixing,
individual identity, modernisation of business registers, under-payment of
superannuation, money laundering and beneficial ownership. We have worked closely
with these reviews, contributing ideas to them and seeking their views on matters we
have examined.
Any effective response to the black economy must be genuinely whole-of-government
in nature. In addition to tax, it must involve workplace relations, human services,
immigration (and home affairs, when that department is established), education, our
financial regulatory community and our law enforcement and intelligence
communities. We also recognise the transformation the ATO is undergoing and its
willingness to embrace new technologies, processes and methods of operation which
can better deliver efficient outcomes. This is necessary, as its traditional enforcement
and audit approaches are unable to deal, in all cases, with the trends we identify in this
Report. We also note that the ATO is significantly bound by resource constraints.
High priority recommendations
We recommend that consideration be given to the following.
1. A time-limited amnesty with a bias for people in the cash economy rather than
those engaged in criminal conduct. This should be followed by an enforcement
blitz.
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Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
2. Australian Business Number (ABN) integrity reforms. The Government should
adopt a number of measures to strengthen the ABN system, including: banning
people on certain visas and apprentices from getting ABNs; requiring periodic
renewal of ABNs (which would be conditional on meeting tax obligations); and
providing for real-time verification of ABNs.
3. Individual identity. To counter the risk of identity fraud, we recommend that the
Government introduce a plan that allows individuals to use a digital credential,
biometrically secured to an individual's own smartphone or connected device, for
people to use in all their interactions with public agencies. Individuals would
'own' this credential, which should not be used to create government databases
or to collect individual biometric data.
4. Taxable Payment Reporting System extension. Apply the Taxable Payments
Reporting System to additional high-risk sectors, including security contractors,
road freight transport, IT contractors, owner-builders and home improvements
from 1 July 2018 (reporting to start 1 July 2019).
5. Sharing Economy. A reporting system for sharing or gig economy operators
should be put in place.
6. Tougher and more visible enforcement. New and strengthened penalties for
phoenixing, ABN fraud, sham contracting and illegal tobacco, making more use
of civil law provisions. There should be more high-profile prosecutions, more
visible and efficient prosecutions and fewer confidential settlements.
7. Small business incentive. In addition to the current instant asset write-off, small
businesses that adopt (or have already adopted) entirely non-cash business
models should receive tax instalment timing relief, benefitting their cash-flows.
Further, small businesses that fulfil a set of core compliance activities should
benefit from a regulatory safe-harbour, which means they will be treated as
low-risk. We also recommend that further downward pressure be put on card
interchange fees, which will benefit both small businesses and consumers.
8. Moving to a near cash free economy. A $10,000 economy-wide cash limit should
be introduced.
9. Payment of wages into bank accounts to increase transparency.
10. Non-deductibility of undocumented contractor payments and cash wages.
11. Hardwiring government. Better sharing of data across agencies and the
application of leading-edge analytics to more effectively enforce existing laws.
Further funding for the National Criminal Database.
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Extracts from the final report of the Black Economy Taskforce
12. Changing social norms and education. An initial, focussed public awareness
campaign designed to raise consumer awareness of the costs and risks associated
with the black economy, including the reminder that this is not a victimless
crime. Education must also play a role.
13. Commonwealth Procurement. We recommend that the Government limit
procurement opportunities to firms with a good tax record. Bidders for contracts
over a certain size would obtain a certificate of tax compliance from the ATO
and issue a tax transparency report.
14. Tackling illegal tobacco. An enforcement blitz following the passage of the
Tobacco Control Act which consolidates offence provisions. Co-locating
enforcement officers from a number of Commonwealth agencies and giving them
new powers to provide a one-stop shop and single point of accountability with a
stronger focus on the retail and distribution parts of the problem.
15. Illegal gambling. Better use of existing enforcement tools and information
exchange to disrupt illegal gambling and other actions including blocking
offshore websites offering services to Australians and prosecuting providers and
participants.
16. Phoenixing. Tougher and better targeted promoter penalties, better early
detection and asset clawbacks.
Institutional legacy
Our Review has highlighted the scope to strengthen, streamline and better focus our
institutional arrangements for countering the black economy.
At present, we do not have a single policy and strategic home for the black economy
within government; no central body examines emerging trends and vulnerabilities from
a whole-of-economy perspective. On the operational front, we need to develop our
capacity to tackle high-value, complex and cross-cutting black economy abuses,
including criminal involvement in labour exploitation. Third, there is no obvious focal
point for public complaints, concerns and allegations about the black economy.
In light of this, we recommend that the Government consider the following:
1. A central agency-led advisory board, including both public and private sector
representatives, to monitor trends and risks in the black economy and prepare
a five yearly report on these. The board would meet twice a year. It would
consider evidence on the overall size of the problem and the factors which may
be contributing to its growth (or reduction). The reports would be made public
as part of the Intergenerational Report.
2. Establishment of a standing Taskforce (modelled on the Serious Financial
Crime Taskforce) to identify, respond to and prosecute serious, complex black
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Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
economy fraud. The taskforce model, which has proven successful in
Australia, brings agencies together for a specific, mutually-agreed purpose,
allowing them to 'pool' data, staff, powers and operational capabilities. After
consulting with the law enforcement community, we have opted against
recommending a new agency (like the United Kingdom's Serious Fraud
Office), which could further silo and fragment our efforts.
3. A dedicated program of cooperation with the states and territories. This would
focus, in the first instance, on better data sharing, small business red-tape
reduction and joint enforcement efforts. While cooperation takes place in some
areas, we are a long way short of fully exploiting the variety of tools and
resources (licencing, tax information and enforcement) governments,
separately, possess.
4. Establishment of a Black Economy Ombudsman's Office and hotline. The
Ombudsman would be the public face for this issue and play a proactive role
both within government and in the community. The black economy hotline
should replace the plethora of existing agency hotlines with the exception of
the National Security Hotline. It would triage incoming calls, referring them to
the right agency and, where possible, publicly report on follow-up
actions taken.
Chapter 6: A reporting architecture for a new economy
Our reporting systems need to be better
Key Points
The bed-rock of any tax system must be reporting arrangements which capture,
efficiently and seamlessly, all taxable economic activities. Reporting should not stifle
activity and entrepreneurism; just relate the payments that have been made. The STP
initiative, which will take effect in 2018, will streamline and improve the transparency
of PAYG reporting.
In the new economy, labour, goods and services are being delivered in new ways often
outside the PAYG reporting net. The sharing economy is one such area. Innovation in
business models should be supported, but regulation needs to adapt. Home-based
services (such as nannies and dog walking services) and independent contractors are
other examples of this.
This transparency gap allows the black economy to proliferate, creating an uneven
playing field for those (including traditional employees) who are subject to current
reporting requirements.
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Extracts from the final report of the Black Economy Taskforce
A modern, comprehensive and low compliance reporting architecture is a better
approach than options like withholding, which introduce greater compliance burdens
and substantially affect cash-flows. Withholding should not be ruled out as a last resort
for particularly problematic sectors.
Observation: Building a hot-house
Master Builders Australia informed us that the building and construction industry:
• Is the second largest in the country, after the financial sector, with revenues of over
$300 billion in 2016-17.
• Accounts for approximately 9.4 per cent of total economic growth (Gross Value
Added) on average per year since 1996.
• Employs more than 1.1 million people.
• Includes more business entities than any other industry (approximately 360,000 as
at June 2016).
They also told us, 'The size and nature of the building and construction industry, as
well as the nature of how construction projects are delivered, creates an inherent
expansion of circumstances in which opportunities to display avoidance are present.
This is a risk to the sector, the economy, and Master Builders' members. It is a
circumstance where those who do the right thing are undermined and disadvantaged.'
The Construction, Forestry, Mining and Energy Union (CFMEU) told us that black
economy behaviours like the below have long been a part of the building and
construction industry, noting that 'On one view, the construction industry is less a
microcosm of, and more a hot-house for, the 'black economy':
• Cash-in-hand payments
• Non or under-reporting of income
• Poor or false records
• Phoenixing
• Sham contracting
• Underpayment and exploitation of workers
• ABN fraud and abuse
• Using interposed entities to avoid tax
CFMEU also noted that 'One of the few measures that appears to have had some
impact on cash-in-hand payments and other black economy practices in the
construction industry is the introduction of the taxable payments reporting system ... '.
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Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
The economy is changing ...
The face of the Australian economy has fundamentally changed in recent decades. We
have seen a shift away from traditional employment towards contracting,
self-employment and use of labour hire firms. We have become a more services-based
economy, parts of which are dominated by contractors. And in recent years, the
so-called sharing economy has risen to prominence and alongside a rise in freelancing.
These changes are set to continue. Independent contracting and the sharing economy
are attractive to many. They offer flexibility, independence and the prospect of rewards
which traditional employment may lack. Contracting is spreading to new parts of the
economy, including a range of personal and domestic services.4 Sharing economy
platforms have established a foothold. As governments remove or scale back
regulatory barriers which limit them, they will continue to grow. Technology,
including the rise of labour market matching sites, is giving these changes greater
impetus.
Observation: Sharing Economy Participants
People participate in the sharing economy for a range of reasons. For some, the sharing
economy can be a pathway to transition from unemployment and underemployment
into the full-time workforce. For others, it is a stepping stone from receiving welfare
payments to regaining financial independence.
Splend provides people with a rental car so they can earn a flexible income with
sharing economy platforms such as Uber. Additionally, Splend provides members with
ongoing coaching, training and mentoring to ensure they become a successful small
business owner.
Splend's platform has been supporting people involved in the Government's New
Enterprise Incentive Scheme (NEIS) and Job Active Pathways. The flexible working
hours of the sharing economy are attractive to a wide range of individuals, including
the increasing number of over 40-year-old job seekers who are finding it hard to
re-enter the workforce.
... but our tax reporting arrangements are not.
Our tax reporting systems are based on the old economy. The PAYG reporting and
withholding regime was designed for traditional wage labour and bricks and mortar
businesses. While it continues to capture a large proportion of the workforce, its
coverage has been falling. In the contracting economy, by contrast, services are
delivered outside this reporting net.
This transparency gap is not desirable for a number of reasons. It denies the tax
authorities basic information which they can use when checking tax returns. Their
4
There are roughly one million independent contractors in Australia: Australian Bureau of
Statistics, 6333.0 -- Characteristics of Employment, Australia, August 2016.
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Extracts from the final report of the Black Economy Taskforce
ability to focus their audit and compliance efforts is limited. When transparency is
lacking, some taxpayers will be tempted not to declare or fully disclose their earnings.
Indeed, in a self-assessment tax system like ours, the absence of a comprehensive
reporting framework poses serious risks.
'Third-party reporting has proven to be an effective measure of ensuring
taxpayer compliance with their taxpayer obligations.' The Tax Institute
Sham contracting, which we discuss in Chapter 10, becomes more attractive in these
circumstances. When employers fail to report wage and salary payments, they are in
clear breach of their obligations. At present, few such obligations apply to payments to
contractors.
Tax reporting arrangements can obviate the need for more stringent responses to tax
evasion, including tax withholding. Tax withholding is a reliable way to improve
compliance, but imposes compliance costs and adversely affects the payee's cash
flows. If applied across the tax paying population, regardless of compliance risk,
withholding would be seen by many as excessive.
Any tax reporting arrangements must be easy and inexpensive for businesses to comply
with. The information asked for must be clear and limited to key data. Where possible,
systems should be automated and able to be integrated into business software products.
What should a new reporting system look like?
Australia already has a contractor payment reporting system in place (the TPRS), but it
only covers a small number of high-risk sectors. It initially applied only to the building
and construction industry, where it has had promising results. In the 2017-18 Budget,
the Government announced it would be extended to contractors in the couriers and
cleaning industries. Other reporting schemes include third-party reporting for major
government entities and reporting of business transactions through payment systems.
We think the TPRS should be extended to other high-risk sectors of the economy.
Security providers, road freight transport, and IT contractors should be covered, as well
as owner-builders and home improvements. Reporting exemptions provided to some
public sector agencies should also be removed.
Observation: Success of TPRS in the construction industry
When TPRS was introduced in the building and construction industry it raised an
additional $2.3 billion in tax liabilities in its first year alone (the 2012-13 year).5
• $265 million from outstanding returns being lodged -- 249,000 contractors
were found to have outstanding returns
5
Australian Taxation Office, Taxable payments reporting -- Effectiveness measurement,
May 2015.
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• $506 million GST -- a 6.1 per cent increase in net GST from the industry in
a single year
• $1,128 million PAYGW -- demonstrates significant under-reporting of
wages and concomitant underpayment of personal income tax
• $357 million pay as you go (PAYG) instalments -- an additional 50,306
taxpayers were identified as payees
This will not be the total increase as at the time the ATO report these results there were
76,000 contractors who had not lodged returns for that year, 53,000 who had lodged
but TPRS reports indicated they had underreported, and 84,000 contractors without an
active GST registration that TPRS reports indicated had received payments likely
subject to GST.
The ATO notes that while increases cannot be attributed solely to the impact of the
TPRS, it is likely that the majority of the increase flows from the introduction of the
system, the communication and education program together with acceptance of the
system by reporting businesses.
As at the time of writing, the ATO was analysing the data in preparation for publishing
figures for the 2013-2014 and 2014-2015 years. The additional liabilities for future
years are expected to reduce because the first year of operation has an element of
'catching-up' with past years, not least from bringing some people into the system.
The success of TPRS could be magnified by using the data it generates to identify
those contractors who receive all or vast majority of income from a single source,
which is an indicator of sham contracting.
In our consultations we have been told that TPRS reporting, although only required
annually, can be time consuming. Many businesses lodge paper-based forms. The
modernisation of the TPRS should emulate the STP initiative, which while still in its
early stages, promises benefits for taxpayers (simpler compliance) and the ATO
(real-time and more accurate information).
We also recommend the adoption of a reporting regime for sharing or gig economy
platforms. This could be linked to the TPRS or undertaken on a stand-alone basis or
possibly aligned with STP.
Any changes to reporting arrangements, including the introduction of new ones, should
avoid imposing overlapping burdens on taxpayers. If a firm is already reporting under
the TPRS, it should not have to duplicate this under a sharing economy or other
reporting initiative. Consideration will need to be given to how duplication can be
avoided.
We are not recommending the introduction of tax withholding for contractors.
However, Governments should not rule out withholding in cases of serious and
persistent non-compliance.
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Extracts from the final report of the Black Economy Taskforce
We also note that overseas experience indicates that withholding systems are
more effective than reporting regimes in improving compliance in cash
industries.' BDO
Observation: Potential high-risk industries
Stakeholders told us that non-compliance is a significant problem in other industries
including traffic management, nail salons, scaffolding, removalists, car repair, milk
bars and car washes. We encourage the ATO to review these industries and if they are
found to be high-risk, advise government of options to tackle the problem, including
potentially extending reporting to these industries.
Recommendation 6.2: A sharing economy reporting regime
Operators of designated sharing ('gig') economy websites should be required to report
payments made to their users to the ATO, DSS and other government agencies as
appropriate. The Government should also continue to raise users' awareness about the
potential tax obligations from participation in sharing economy activities.
Description
Reporting income information
Operators of sharing economy platforms should be required to submit at least annual
data on income received by their users based in Australia to the ATO.6 The information
should be comprehensive enough to allow the ATO to match the information to
individual taxpayers, that is, it should contain at a minimum the full name of users,
address and date of birth. Extending the requirement to ABNs should also be explored
(for those who have, or should have ABNs), but the detailed set standard for reporting
can be agreed on implementation. The ATO should use this data to pre-fill tax
returns. The data should also be available to other agencies such as DSS. We are
aware that some platforms already provide information to the ATO, or they withhold
and remit PAYG. Additionally, many of these platforms already provide a summary of
this data to their participants and the platforms have sophisticated and intelligent data
and modelling capabilities that can provide meaningful data to regulators.
The options for more regular reporting of such data should be explored; more regular
reporting would allow more real-time analysis and use. Whether the sharing economy
reporting regime can be incorporated to comply with TPRS obligations, immediately or
later, should also be explored.
6
For the purpose of this discussion, sharing economy websites are online services which
operate as platforms for the sale or hire of goods/services or operate as a labour market
intermediary and, in providing such services, capture the payments or require payments of
fees or wages to an individual or entity to pass through an entity controlled by the online
service.
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Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
Consideration will need to be given to determine which platforms the scheme should
extend to given the variety of business models in use. As a guide, reporting should
apply to payments to users who offer their labour as services (rather than goods) and
are not classified as employees (in which case other reporting obligations already
apply). Difficulties may exist where platforms are a mere matching service without the
payment going through the platform itself.
Relevant overseas located platforms should be included in the scheme. Where
platforms are not participating voluntarily, options may need to be developed to ensure
they comply. For example, reporting obligations could be included as a condition for
operating in Australia, such as being a condition of obtaining a licence (where
applicable), and the Government should work with States and Territories to consider
such options. The Government should also work in close cooperation with other
countries to find ways to cover global sharing platforms in domestic tax and regulatory
frameworks. Internet Service Provider (ISP) level blocking may need to be considered
as a final resort for non-compliant platforms. Working with banks to prevent payments
to or through non-compliant platforms could also be considered as a final resort for
non-compliant platforms.
Education
Users of sharing economy platforms need to be made aware that income earned from
participation in the sharing economy is likely taxable income. Their activities could
also give rise to capital gains tax obligations, and could impact welfare and other
payments.
The ATO already provides guidance. However, it is important that sharing economy
participants receive information even if they do not look for it, as many may not be
aware that even small or intermittent income could be taxable. Operators of sharing
economy websites should also be encouraged to highlight the need to consider tax
obligations to their users, and refer them to ATO information.
Objective
• For the ATO and other agencies to receive information on income received by
sharing economy users to enhance voluntary compliance and provide data for
income information matching, including for social security purposes.
• Ensure that sharing economy users are aware of their tax obligations, further
driving voluntary compliance.
Observation: Labour hire and the sharing or gig economy
Some newer models of what could be considered labour hire use the sharing or gig
economy model. The labour hire firm operates as an online platform, workers and
businesses seeking workers are matched through the platform. The labour hire platform
may just match staff to jobs, with the business paying users directly, or may provide
users with the business paying the platform. The same platform may operate both
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models, with it varying between what the business chooses, either generally, or for
particular workers.
Discussion
Problem this recommendation seeks to address
The sharing economy has grown strongly over the past few years and platforms have
evolved from a place where people could share their existing assets on a casual basis
and do some work on the side to a more substantial form of income generating work.
'...most existing policy and legislative instruments would have been designed
for a world that predominantly traded on physical goods or in-person
services relying heavily on paper-based business process ... ' COSBOA
The number of users is growing strongly, and is supporting a rise in freelancing. Users
selling their services through sharing economy platforms may be employees or may be
contractors, depending on the particular arrangements for that platform. If they are
independent contractors no tax is withheld from the income they generate on the
platform, and platforms do not have to report information on payments made to users
to the ATO, unless asked to do so under the ATO's information gathering powers, or
through voluntary participation by the platform.
There is a risk that people selling their services through sharing platforms are not
paying the right amount of tax as there is no reporting and withholding and many users
may not be aware of or understand their obligations. Lack of knowledge about tax, the
novelty of this type of income generating work and platform-user relationship, as well
as poor record keeping all contribute to the problem. While there is no reliable data
available yet, it may also be the case that some of the non-compliance is deliberate.
While payments are electronic, without a reporting regime in place it is difficult for the
ATO to gain information on compliance of sharing economy users unless targeted
audits are used.
Observation: Day in the life of a 'gigger'
Spend the morning dog sitting through 'madpaws' app.
Spend the afternoon putting furniture together from Airtasker apps.
Deliver food in the evening with 2 or 3 food delivery apps (Uber eats, Menulog,
Foodora, Deliveroo).
Drive for Uber on Friday night when demand is high.
Rationale
Streamlined reporting and pre-fill of tax returns will reduce individuals' compliance
costs and make it easier for sharing economy participants to meet their obligations. It
would help individuals by providing them with information on their sharing economy
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Treasury Laws Amendment (2021 Measures No. 7) Bill 2021
income through the tax return pre-fill service, and allow the ATO (and other agencies
through data sharing) to undertake compliance activities.
Formalising the reporting requirements would also send a clear signal that income from
sharing economy platforms is in most cases taxable income. It would level the playing
field between traditional operators and new economy operators.
'As digital technology is adopted across the economy, segmenting the digital
economy is increasingly difficult. In other words, because the digital
economy is increasingly becoming the economy itself, it would be difficult, if
not impossible, to ring-fence the digital economy from the rest of the
economy.' COSBOA
Other options considered
Sharing economy platforms to withhold tax
This option would require sharing economy platforms to deduct income tax from
payments made to users and remit this money to the ATO. This would either be topped
up or refunded as part of the tax return process. The withholding tax could be at
various rates, for example a flat 20 per cent or based on an individuals' prior year
income.
Applying withholding would substantially reduce non-compliance by sharing economy
participants and may raise additional revenue through increased compliance. However,
such an approach is relatively onerous and may be criticised as discriminating against
transactions which occur on sharing economy platforms. As discussed above, there are
various reasons for treating independent contractors differently to employees, and this
extends to those sharing economy suppliers who are independent contractors (and not
all necessarily are). As discussed above, withholding should be considered as an option
if non-compliance remains a problem despite a reporting obligation.
Bright-line test for business-hobby distinction
In connection with the sharing economy, we also examined whether the
hobby-business distinction remains suitable. It was put to us that current test creates a
lot of uncertainty and is difficult to apply.
After consultations and considering various alternative options for a bright-line test, we
came to the view that the current distinction remains appropriate. Overwhelmingly the
activity on sharing economy platforms is likely to be business related, with users
generally using the platform to generate income, provide services to strangers and
undertake regular rather than once-off activities. A bright-line test could also be seen to
interfere with the current tax free threshold and rather than simplify compliance,
introduce further complexities. A bright line test just for sharing economy activity
would also create a distorting disparity between different business operating models.
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Extracts from the final report of the Black Economy Taskforce
While there may be instances where it could be considered a hobby, there should be a
general presumption that sharing economy users are conducting a business, and the
current test and guidance are sufficiently clear. A reporting regime, including
pre-filling of tax returns, as well as education of sharing economy users will further
provide clarity.
Stakeholder views
Feedback from consultations has overwhelmingly backed applying a reporting regime
to sharing economy platforms. A well-known Australian sharing economy platform has
told us that they would support a formalised reporting regime and that the suggested
data (name, address, DOB) could easily be provided. They, and other similar
platforms, already collect this information about their users. ABNs could also be
supplied.
International experience
Many other jurisdictions (India, France, Spain, and the USA) require sharing economy
websites such as Airbnb to withhold tax, mostly local hotel/accommodation taxes.
Uber withholds tax for drivers in Estonia.
Working with global sharing economy platforms to bring them into domestic tax and
regulatory frameworks has been identified as an important matter for international
cooperation.
Implementation considerations
Overseas platforms will not easily be covered by Australian legislative change.
Consideration will have to be given to how they can be compelled to participate if
voluntary cooperation is not sufficient.
Consideration will also need to be given to determine at what point sharing economy
platforms come under this scheme. While this is an issue that applies more broadly if
TPRS is implemented across the economy, it may be particularly difficult for
businesses in the 'new economy' and the need to avoid imposing large compliance
costs on start-ups, and the potential for very rapid change.
The recommendation should also be considered in conjunction with our views on
contracting, outlined in Chapter 10.
These organisations are sophisticated and have significant data holdings which can
assist with valuations, intelligence and industry trends. For example, a particular
sharing economy operator told us that the ATO income benchmark for taxi drivers in
capital cities was 40 per cent below what drivers were actually earning.
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Attachment B
Ramsay Review - regulation impact
analysis
On 9 May 2017, the Government announced its response to the Ramsay
Review, which was the first comprehensive review of the financial
system's EDR framework. The Ramsay Review was commissioned by the
Government in April 2016 and led by an independent, expert panel
comprising Professor Ian Ramsay, Ms Julie Abramson and Mr Alan
Kirkland.
Treasury has certified that the Ramsay Review and subsequent
consultation as a process and analysis equivalent to a regulation impact
statement.
Policy objective
The Government's reforms to the EDR framework are intended to address
problems with the dispute resolution arrangements in the financial system,
primarily EDR. EDR is used when a consumer or small business has a
complaint with a financial service provider and wishes to use an impartial
out-of-court process to settle the dispute. EDR should provide low cost,
fast and flexible access to redress to consumers.
The current EDR arrangements in the financial system consist of FOS,
CIO and the SCT. In 2015-16, FOS, CIO and SCT received 41,223
disputes in total, with FOS receiving 34,095 disputes (83 per cent), CIO
receiving 4,760 disputes (12 per cent) and SCT receiving 2,368 disputes
(6 per cent).
The Ramsay Review was the first comprehensive review of the financial
system's EDR framework. It found that the current framework is the
product of history rather than design and a number of features of the
current system mean that it is not producing the best possible outcomes.
Firstly, the Ramsay Review found the existence of multiple EDR schemes
with overlapping jurisdictions means: it is difficult to achieve comparable
outcomes for consumers with similar complaints; it is difficult for
consumers to progress disputes involving firms that are members of
different schemes; and there is an increased risk of consumer confusion.
The Ramsay Review also found that multiple EDR bodies resulted in
duplicative costs for industry and for the regulator.
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The Ramsay Review also found that allowing competition between
schemes, as currently occurs between FOS and CIO, creates the risk that
schemes compete in relation to benefits provided to Financial Firms,
rather than on achieving better outcomes for consumers.
The Ramsay Review found that the monetary limits and compensation
caps of the schemes have fallen behind what is required to ensure access
to justice for consumers and small business. FOS and CIO's current
monetary limit of $500,000 and compensation cap of $309,000 are no
longer fit-for-purpose and bear little relationship to the value of some
financial products (for example, mortgage balances, home insurance
policies and some investments), which results in a gap in EDR coverage.
The Ramsay Review also identified that small businesses do not have
adequate access to EDR because the existing monetary limits of $500,000
for the value of the claim under dispute, and $2 million in relation to
credit facilities and the existing compensation cap of $309,000, preclude
many small business disputes from being able to be brought to the
schemes.
Finally, the Ramsay Review found that the dispute resolution
arrangements for superannuation require improvement. Although SCT has
a highly professional staff and Chairperson, the Ramsay Review found it
was unable to resolve disputes quickly, in contrast to FOS and CIO. For
example, in 2015-16, for disputes that reached determination, it took an
average of 796 days for the dispute to be resolved.
The Ramsay Review found that the problems facing SCT could be
attributed to a lack of flexibility in its funding -- there is no link between
SCT funding and the level of complaints it receives -- as well as outdated
governance arrangements and limited flexibility to determine its dispute
resolution processes. Additionally, there was a lack of focus on achieving
system-wide improvements and the existing accountability mechanisms
were passive and indirect. The Ramsay Review considered that these
issues could not be addressed through retaining and reforming the SCT
and a shift to an ombudsman scheme was required.
The Ramsay Review found that these problems of the existing framework
are significant and cannot be seen as self-correcting. Market forces will
not resolve the above problems, necessitating Government action.
Implementation options
Alternative Option: Maintain the status quo
This option would essentially maintain the current arrangements of
multiple EDR bodies.
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Ramsay Review - regulation impact analysis
The Ramsay Review found that the pressures on SCT would increase as
the superannuation system matures and an increasing proportion of the
population moves from the accumulation to the drawdown (retirement)
phase.
In addition, the Ramsay Review found that this option would not address
problems arising under a multi-scheme framework with overlapping
jurisdictions (consumer confusion, inconsistent outcomes for comparable
disputes and duplicative costs). Therefore, this was not one of the
recommendations of the Ramsay Review and was not one pursued by
Government.
Alternative Option: Reform SCT only
Under this option, there would be some targeted reforms to the SCT to
increase the way the SCT is funded (for example, volume based funding)
and improved governance arrangements.
However, the Ramsay Review found that there was inherent inflexibility
in retaining a tribunal structure, which could only be addressed through
migrating superannuation disputes from a tribunal to an ombudsman
structure.
In addition, reforming only the SCT would also not address the problems
with other aspects of the EDR framework.
Recommended Option: Establish the AFCA as an industry based scheme
based on Ramsay Review recommendations
This option would switch to a single EDR body to replace the FOS, CIO
and SCT with a one stop shop dispute resolution body based on an
industry ombudsman model.
The shift to a single EDR body will address a number of problems with
the existing framework. It will improve outcomes for consumers by:
(i) increasing consistency in processes and outcomes for similar
complaints;
(ii) making it easier to pursue disputes involving multiple
Financial Firms; and
(iii) decreasing consumer confusion.
A single EDR body will also eliminate duplicative costs for industry, the
regulator and other stakeholders.
The Ramsay Review found that an ombudsman model carried advantages
over the existing framework. For superannuation disputes in particular, a
single EDR body based on an ombudsman model carries large benefits as
it will provide flexibility and increase responsiveness to improve the
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timeliness of superannuation disputes. Ombudsman schemes provide
complainants with an alternative to the judicial system. The traditional
court system, which relies on lawyers, the rules of evidence and specific
processes and procedures can be complex and intimidating for consumers.
In this regard, a benefit of ombudsman schemes is that they provide
claimants with a relatively simple process, led by the ombudsman,
negating the need for formal legal representation. Furthermore,
ombudsman services are not restricted to resolving legal issues; rather,
they have scope to consider a broader range of factors.
Where there is a general problem in an industry affecting multiple
consumers and a number of similar complaints are received about a
particular issue, ombudsman schemes have the capacity to instigate and
conduct investigations to identify systemic issues.
Ombudsman schemes are also able to promote access to justice through
their ability to adapt and innovate in response to changes in the external
environment. This has been particularly relevant in the financial system,
which has seen rapid changes in the types of products being sold and the
types of consumers purchasing them.
Assessment of impacts
Consumers and small businesses will be the primary beneficiaries of the
new framework. The primary benefits will be increased access to justice
and easier access to dispute services.
Increased limits and decreased confusion caused by multiple schemes will
mean that consumers and small businesses will save more time and be
able to bring higher value disputes to the schemes. Having a single dispute
resolution body will also promote consistency of outcomes, which will
provide industry and consumers with greater certainty as to what the
outcome of a complaint will be when it is lodged with AFCA.
For superannuation complaints, the new scheme will reduce the time
taken for complaints to be resolved. This will benefit both consumers and
industry.
The Ramsay Review noted that a single dispute resolution scheme would
have a greater ability to shift resources from those areas experiencing a
reduction in dispute volumes to those areas experiencing higher dispute
volumes.
There will be a number of costs associated with the transition to the new
scheme. Impacts on industry include paying membership and dispute
resolution fees to AFCA, having to update disclosure documents, and
having to account for increased IDR reporting to ASIC. The increased
monetary limits will also likely result in more disputes being lodged with
AFCA, which will require additional funding from industry.
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Ramsay Review - regulation impact analysis
Superannuation funds will also need to be members of AFCA, meaning
they will need to pay membership and dispute resolution fees and will also
incur costs to update disclosure documents.
Treasury considers that the benefits to consumers, small businesses and
industry will outweigh the costs associated with implementing the new
framework.
Regulatory burden
Treasury has estimated the costs for business using the governments
Regulation Impact Framework as required by the Office of Best Practice
Regulation. The costs are shown below.
Average annual regulatory costs (from business as usual)
Change in Business Community Individuals Total change
costs organisations in costs
($ million)
Total, by $43.85 million $n/a $n/a $43.85 million
sector
Consultation
In the course of the Ramsay Review, the Panel conducted multiple rounds
of consultation:
• The Ramsay Review published an Issues Paper, which was
released for public consultation for a period of four weeks
from 9 September 2016 to 7 October 2016. The Panel
received 127 submissions to the EDR Review Issues Paper,
33 of which were marked as confidential and 1 anonymous.
• The Ramsay Review published an Interim Report, which was
released for public consultation for a period of seven weeks
from 6 December 2016 to 27 January 2017. The Panel
received 56 submissions to the EDR Review Interim Report,
four of which were marked as confidential.
• The Ramsay Review invited parties to make submissions by
3 March 2017 on Recommendations 11 and 13 of the
Australian Small Business and Family Enterprise
Ombudsman's report on the Inquiry into small business
loans. The Minister for Revenue and Financial Services
wrote to the Ramsay Review Panel asking them to take
particular account of these recommendations as they prepared
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their final report. Four submissions were received on these
recommendations.
• The Panel held many roundtables and meetings with
individual stakeholders as part of these consultation
processes. The Panel also undertook site visits of each of the
bodies: CIO (14 September 2016); FOS (16 September 2016)
and SCT (16 September 2016).
Following the release of the final report and Government response, the
Government consulted on exposure draft legislation (draft Bill and
regulations) from 17 May to 14 June 2017. As part of this consultation, a
range of consultation materials were published including a consultation
paper on the new dispute resolution framework, draft explanatory
memorandum, fact sheet and consultation note on the Ministerial
authorisation process.
In the course of finalising the regulatory costings, Treasury has
undertaken targeted consultation with key stakeholders to inform the
parameters and assumptions used.
Conclusion and recommended option
The recommended option will involve:
• establishing a new one-stop-shop dispute resolution body --
AFCA which will replace FOS, CIO and SCT and handle all
financial complaints, including superannuation complaints;
• ensuring AFCA will be overseen by a board comprising an
independent Chair and equal numbers of directors with
consumer and industry backgrounds;
• requiring AFCA to be industry funded;
• requiring all Financial Firms (including superannuation
funds) to be members of AFCA; and
• making ASIC responsible for overseeing AFCA to ensure
that it meets the standards set out in the legislation. To fulfil
this role, the legislation will provide ASIC with the ability to
set regulatory requirements that AFCA must adhere to and
also provide ASIC with a general directions power to compel
AFCA to comply with standards in the legislation and in
regulatory requirements.
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Implementation and evaluation
AFCA will be established as part of the Treasury Laws Amendment
(Putting Consumers First--Establishment of the Australian Financial
Complaints Authority) Bill 2017. Following passage of the legislation, a
not-for-profit company will be authorised as AFCA by the Minister.
AFCA will commence operations on 1 July 2018 and will receive all
financial disputes, including superannuation disputes.
ASIC will be responsible for ongoing monitoring of AFCA to ensure that
it meets the standards set out in legislation. In addition, AFCA will be
subject to periodic independent reviews. AFCA will also be required to
establish an independent assessor who will assess the processes by which
AFCA makes decisions.
As an industry body, key elements of AFCA's operations will be set out in
its operating rules or 'terms of reference'. The Minister for Revenue and
Financial Services established a transition team, chaired by Dr Malcolm
Edey, to lead the creation of AFCA. Dr Edey will provide advice to the
Minister on the terms of reference, governance and funding arrangements,
as well as transitional arrangements and the authorisation process. The
transition team will consult extensively with ASIC, the existing EDR
bodies, industry and consumer groups, thereby ensuring a smooth
transition from the existing framework to AFCA.
The SCT, as a statutory body, will continue operation for an additional
two years to resolve all legacy complaints. The legislation also makes
provisions to allow FOS and CIO to continue operations for up to an
additional 12 months to resolve legacy complaints.
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