Bills Digest no. 88, 2016–17
PDF version [578KB]
Mary Anne Neilsen
Law and Bills Digest Section
30
March 2017
Contents
Purpose of the Bill
Background
Taxation of working holiday makers
Registration of working holiday maker
employers
Committee consideration
Senate Selection of Bills Committee
Senate Standing Committee for the
Scrutiny of Bills
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Key issues and provisions
Working holiday maker employer
registration information
Disclosure of protected information
to the Fair Work Ombudsman
Comment
Date introduced: 16
February 2017
House: House of
Representatives
Portfolio: Treasury
Commencement: The
first 1 January, 1 April, 1 July or 1 October to occur
after the day this Act receives the Royal Assent.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at March 2017.
Purpose of
the Bill
The purpose of the Treasury Laws Amendment (Working Holiday
Maker Employer Register) Bill 2017 (the Bill) is to make two amendments
to tighten the information disclosure requirements for the working holiday
maker employer register.
The first of the amendments is to the A New Tax System (Australian
Business Number) Act 1999 (ABN Act) to ensure that details of
the working holiday maker employer register will not be able to be made
publicly available.
The second amendment is to the Taxation
Administration Act 1953 (TA Act) to ensure that information
sharing between the Australian Tax Office (ATO) and the Fair Work Ombudsman
(FWO) is only undertaken in situations in which an entity is non-compliant, or
is reasonably suspected of non-compliance, with a tax law.
Background
Taxation of working holiday makers
As part of the 2015–16 Budget, the Government announced a
measure to treat most people who are temporarily in Australia for a working
holiday as non-residents for tax purposes from 1 July 2016.[1]
This would have meant that many working holiday makers (WHMs) would have been
taxed at a rate of 32.5 per cent from the first dollar earned and was
forecast to raise revenue of $540 million over the forward estimates.[2]
Following a review process, the Government announced on
27 September 2016 an amended measure that would have seen tax paid for by
WHMs earning below $37,000 at a rate of 19 per cent. Ordinary marginal tax
rates would apply after that.[3]
The necessary package of legislation to implement this measure was introduced
into Parliament on 12 October 2016. However, on 28 November 2016, after further
negotiations to secure passage through the Senate, the Treasurer announced that
the rate of tax was to be further reduced from 19 per cent to 15 per cent.[4]
The legislation received Royal Assent on 2 December 2016 and the scheme
commenced on 1 January 2017.[5]
For further background the reader is referred to the Bills Digest for the
package of Bills.[6]
Registration of working
holiday maker employers
A part of the package of legislation introducing new tax
arrangements for WHMs was a framework requiring employers of WHMs to register
with the Commission of Taxation to be able to withhold tax at the new rate of
15 per cent.[7]
Of particular relevance to the amendments in the Bill was the Treasury Laws
Amendment (Working Holiday Maker Reform) Act 2016 (WHMR Act 2016).
Amongst other things the WHMR Act 2016 amended the ABN Act, the Income Tax
Assessment Act 1997 and
the TA Act to:
- implement
a registration framework for the employers of WHMs[8]
- provide
the administrative arrangements for tax to be withheld at the appropriate rate
for these taxpayers[9]
- require
the Commissioner of Taxation to report annually on the operation of the tax
arrangements[10]
and
- allow
the Commissioner to provide relevant information to the FWO.[11]
The amendments in the Bill, which are described below in
the Key issues and provisions section, affect the first and fourth of
these measures.
Committee consideration
Senate
Selection of Bills Committee
The Senate Selection of Bills Committee determined that
the Bill would not be referred to a committee for inquiry and report.[12]
Senate Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills
had no comment on the Bill.[13]
Policy position of non-government parties/independents
At the time of writing, the views of non-government
parties or independents are not known. However, at the time of the passage of
the WHMR Act 2016 through Parliament, Liberal Democratic Party Senator
David Leyonhjelm strongly criticised the disclosure requirements for the WHM
employer register and the broadening of the rules regarding disclosure of
protected information to the FWO by the ATO.[14]
Position of major interest groups
Media reports in late 2016 stated that some business
groups had privacy concerns about disclosure requirements in the new WHM
employer register scheme.[15]
The Senate Standing Committee on Economics, in its report on the 2016 WHM
package of legislation, also noted that one submission had requested that the
Taxation Commissioner ‘consults with industry in relation to the
nature of the information provided publically in the report on working holiday
makers each year, particularly in relation to privacy concerns’.[16]
It would appear that the amendments proposed in the Bill would address these
concerns although, at the time of writing, there appears to be no public
comment to confirm that this is the case.
Financial implications
The Explanatory Memorandum states that the amendments in
the Bill are estimated to have no revenue impact over the forward estimates
period.[17]
Statement of Compatibility
with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[18]
Parliamentary Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights
considers that the Bill does not raise human rights concerns.[19]
Key issues and provisions
Working holiday maker employer registration information
As noted above, employers of WHMs are now required to be
registered with the Commissioner of Taxation to allow them to withhold tax at
the applicable WHM tax rates. The employer register will
provide data on who employs working holiday makers, what sectors they are
engaged in and where the employers are located. The ATO will report annually to
the Treasurer using information obtained from the register.[20]
Not all information contained in the Australian Business
Register (established by the ABN Act) is publicly available.
Information that may be provided is set out in subsection 26(3) of the ABN
Act and in related regulations.[21]
Information that may be disclosed includes details such as the entity’s name,
Australian Business Number (ABN) and contact details.[22]
Schedule 2 of the WHMR Act 2016 amended subsection
26(3) of the ABN Act so as to allow information on whether the entity is
registered as a WHM employer or whether the entity’s WHM employer registration
has been cancelled to be disclosed.[23]
This change was to allow individuals to look up a business on the Australian Business Register
to determine whether they are registered to withhold tax for WHMs at the
applicable tax rates.[24]
Item 1 of Schedule 1 to the Bill amends subsection
26(3) to repeal the paragraphs inserted by the WHMR Act 2016 specifying
working holiday maker employer information with the effect that such
information is to be kept on a confidential basis. It therefore removes the
ability for details of the WHM employer register to be made public on the ABN
Lookup.
This amendment will have retrospective application and
apply to the giving of copies of entries in the Australian Business Register on
or after 2 December 2016.[25]
The Explanatory Memorandum states that the retrospectivity of this amendment
will not adversely affect taxpayers and WHM employers and it will have the
effect of aligning the amendment with the date of Royal Assent for the WHMR
Act 2016.[26]
It will also make the law consistent with how the Commissioner has administered
the law since the commencement of that Act.
That is, the Commissioner has chosen not to make public any
registration information of working holiday maker employers.[27]
Disclosure of protected
information to the Fair Work Ombudsman
The TA Act creates an offence for the disclosure of
‘protected information’ by ‘taxation officers’.[28]
However, there are a range of circumstances where disclosure of tax information
to another entity is permitted, for example, to the FWO. Prior to the WHMR
Act 2016, disclosure to the FWO could occur only in circumstances where the
record or disclosure:
- was
of the fact of an entity’s actual or reasonably suspected non-compliance with a
taxation law and
- was
for the purpose of ensuring the entity’s compliance with the Fair Work Act
2009.[29]
The WHMR Act 2016[30]
amended these arrangements so as to remove the requirement for disclosures to
the FWO to concern an entity’s non-compliance with a taxation law. Instead, the
Commissioner is currently able to disclose information to the FWO for the
broader purpose of ensuring an entity’s compliance with the Fair Work Act.
Item 3 in Schedule 1 to the Bill has the effect of
reversing these changes and reverting back to the situation prior to the WHMR
Act 2016 so that disclosure to the FWO can only be undertaken in situations
in which an entity is actually non-compliant, or is reasonably suspected of
non-compliance, with a tax law and is for the purposes of ensuring the entity’s
compliance with the Fair Work Act.
Again, this amendment will have retrospective application
and apply to disclosures of information on or after 2 December 2016
(whether the information was held by the Commissioner before, on or after that
day).[31]
The Explanatory Memorandum states that the retrospectivity of this amendment
will have the effect of aligning the amendment with the date of Royal Assent
for the WHMR Act 2016 and will not adversely affect taxpayers and
employers of working holiday makers.[32]
The Explanatory Memorandum advises that the amendments will align the TA Act
with the approach that the Commissioner has been taking in practice since the
commencement of the WHMR Act 2016. That is:
... the Commissioner has not disclosed to the Fair Work
Ombudsman any protected information that is only authorised because of the
expanded exception to the secrecy provisions.[33]
Comment
The provisions in the Bill suggest that the Government has
acknowledged the need for legal clarity about restricting public access to
employer information. However, neither the Explanatory Memorandum nor the
Minister’s second reading speech explain fully the rationale for changing the
disclosure requirements nor why these amendments have been introduced only a
month after commencement of the new WHM scheme. The Explanatory Memorandum
states only that the Bill gives effect to Government’s commitments.[34]
There were, however, media reports during the passage of
the WHMR Act 2016 through the Parliament, indicating some concern about
the disclosure provisions. For example, The Australian Financial Review
reported that employer groups were warning that unions could misuse the Bill’s
‘little discussed workplace provisions to scare employers from hiring foreign
labour’.[35]
Australian Chamber of Commerce and Industry CEO, James Pearson, told The
Australian Financial Review employers were concerned with the Bill’s
requirements for companies to sign up to a public register if they engage any
backpackers. He said the register could ‘send the message that employing
working holiday makers is undesirable’. Mr Pearson also said that a public
register could be misused. ‘For example, unions opposed to the use of foreign
labour may visit registered companies to scare them off hiring backpackers.’[36]
Liberal Democratic Party Senator, David Leyonhjelm, was
also critical of the disclosure requirements. One media report in January
quoted the Senator stating that he had successfully lobbied the Government to
make the register private.[37]
In relation to disclosure by the ATO to the Fair Work Ombudsman, Senator
Leyonhjelm wrote that the changes allowing greater disclosure to the FWO were
historic:[38]
For the first time in Australia's history, it will authorise
the Australian Taxation Office to divulge the private financial details of
employers to the Fair Work Ombudsman so it can enforce government decrees on
wages, including minimum wages, award wages and penalty rates.
[...]
That the Tax Office coercively extracts the financial
information of taxpayers is a concern, but at least it has always kept this
information secret. Divulging the information to the various tentacles of
government is a huge breach of trust that will substantially undermine taxpayer
co-operation with the Tax Office.
The Liberal and National parties are betraying their base and
doing the bidding of the unions with the backpacker tax bill, all the while
pretending to be the tough cop on the beat.[39]
In November 2016, Finance Minister, Senator Mathias
Cormann, in response to a Question without notice from Senator Leyonhjelm on
this subject, defended the provisions. In relation to making the
employer register public on the ABN Lookup website, he said:
This will allow working holiday-makers to
identify whether a prospective employer is registered. Employers who are
registered will be able to withhold tax at the new 19 per cent rate. Other than
identifying that an employer is a registered employer of working
holiday-makers, and the date of registration or deregistration, the register
will not provide any information that is not already available on the ABN
Lookup website. We expect that employers on the register will be those who are
doing the right thing. There should not be a reason for unions to make specific
contact with employers on the register, as they should be compliant employers.[40]
In relation to sharing of information
between the ATO and the FWO, Minister Cormann said:
Sharing of information between the ATO and
the Fair Work Ombudsman will allow the commissioner to disclose information
that is relevant to ensuring an entity's compliance with the Fair Work Act
2009 ... This will provide greater protection to working holiday-makers. This
specifically addresses the Fair Work Ombudsman's report, Inquiry into the
wages and conditions of people working under the 417 Working Holiday Visa
Program, which recommended greater collaboration between the ombudsman and the
Australian Taxation Office.
The report also supported the establishment
of a publicly available employer register for employers of 417 visa holders.
The ATO can already disclose particular tax information to other government
agencies for specific purposes, including agencies dealing with social security
laws such as Centrelink and Medicare; APRA and ASIC; and state tax offices and
law enforcement agencies.
Award wages are, of course, meant to be
observed. It is not correct to say that this is the first type of mechanism to
ensure compliance with the law for wage setting. The arrangements for the
backpacker industry are designed in a way that is adapted for the particular
circumstances of this seasonal workforce.[41]
[1]. This
part of the Digest is taken from K Swoboda and R Dossor, Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016
[and related Bills], Bills digest, 30, 2016–17,
Parliamentary Library, Canberra, 4 November 2016, p. 4.
[2]. Ibid.
[3]. Ibid.
[4]. S Morrison, ‘Second reading speech: Income Tax Rates Amendment (Working Holiday
Maker Reform) Bill 2016 (No. 2)’, House of
Representatives, Debates, 28 November 2016, p. 4568. S
Morrison (Treasurer), Government's better Working Holiday Maker tax arrangements secure
critical Senate support, media release,
1 December 2016.
[5]. Parliament
of Australia, ‘Income
Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016 (No. 2) homepage’,
Australian Parliament website.
[6]. Swoboda,
op. cit.
[7]. Employers who do not register are required to withhold tax at the
32.5 per cent rate.
[8]. WHMR
Act 2016, Schedule 2, items 4 and 5.
[9]. Ibid.,
Schedule 2, item 4.
[10]. Ibid.,
Schedule 3, items 1 to 3.
[11]. Ibid.,
Schedule 4, item 1.
[12]. Senate
Standing Committee for Selection of Bills, Report,
3, 2017, The Senate, Canberra, 23 March 2017, p. 4.
[13]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 3, 2017, The Senate, Canberra, 22 March 2017,
p. 39.
[14]. M
McCarthy, ‘Privacy
concerns raised about Government register for backpacker employers’, ABC
News, 3 January 2017; and D Leyonhjelm, ‘Coalition
does bidding of the unions’, Australian Financial Review, (online
edition), 6 November 2016.
[15]. D Marin-Guzman, ‘Backpacker
register could be 'misused'’, Australian Financial Review, 8 November 2016.
[16]. Senate Economics Legislation Committee, Working Holiday Maker Reform package: Income Tax Rates Amendment
(Working Holiday Maker Reform) Bill 2016 [Provisions], Passenger Movement
Charge Amendment Bill 2016 [Provisions], Superannuation (Departing Australia
Superannuation Payments Tax) Amendment Bill 2016 [Provisions], Treasury Laws
Amendment (Working Holiday Maker Reform) Bill 2016 [Provisions], The Senate, Canberra, November 2016, paragraph 3.16. The submission was from
Growcom, described as the peak industry body representing Queensland
horticulture.
[17]. Explanatory
Memorandum, Treasury Laws Amendment (Working Holiday Maker Employer Register)
Bill 2017, p. 5.
[18]. The
Statement of Compatibility with Human Rights can be found at pages 10–11 of the
Explanatory Memorandum to the Bill.
[19]. Parliamentary
Joint Committee on Human Rights, Report,
2, 2017, The Senate, Canberra, 21 March 2017, p. 57.
[20]. Sections
16-146 and 352-25 of Schedule 1 to the Taxation
Administration Act 1953. See also S Morrison (Treasurer), Working
holiday maker reform package: factsheet, Working holiday fact sheet,
The Treasury, n.d.
[21]. A New Tax System
(Australian Business Number) Regulations 1999 and Swoboda,
op. cit., p. 25.
[22]. Subsection
26(3), A New Tax System (Australian Business Number) Act 1999 and Swoboda, op. cit., p. 25.
[23]. Item 1 of Schedule 2.
[24]. Australian
Business Register (ABN), ‘ABN
lookup’, ABN website.
[25]. Subitem
4(1) of Schedule 1 to the Bill. Given the retrospective application of the
amendments, the commencement dates referred to above (the first 1 January, 1
April, 1 July or 1 October after Royal Assent) would appear unusual.
[26]. Explanatory Memorandum, op. cit., pp. 9–10.
[27]. Ibid.,
p. 8.
[28]. Section
355–25 of Schedule 1 to the TA Act. ‘Protected information’ is defined
in subsection 355–30 of the Act to cover information that was disclosed or
obtained under or for the purposes of a law that was a taxation law, relates to
the affairs of an entity and identifies, or is reasonably capable of being used
to identify, the entity.
[29]. Subsection
355–65(8), Table 7, item 5, Schedule 1 to the Taxation
Administration Act 1953 as at 1 December 2016.
[30]. Item 1 of Schedule 4.
[31]. Subitem
4(3) of Schedule 1 to the Bill.
[32]. Explanatory Memorandum, op. cit., pp. 9–10.
[33]. Ibid.,
p. 9.
[34]. Those
commitments being that the information collected by the Commissioner of
Taxation ‘concerning the employer registration information of employers of
working holiday makers will not be able to be made publicly available’ and ‘the
Commissioner will only be able to disclose protected information to the Fair
Work Ombudsman for an entity that is actually or is reasonably suspected of
non-compliance with a taxation law’. Explanatory Memorandum,
op. cit., p. 7.
[35]. Marin-Guzman, op. cit.
[36]. Ibid.
[37]. McCarthy,
op. cit.
[38]. Leyonhjelm,
op. cit.
[39]. Ibid.
[40]. M
Cormann, ‘Answer
to Question without notice: Working Holiday Maker Program’, [Questioner: D
Leyonhjelm], Senate, Debates, 9 November 2016, p. 2327.
[41]. Ibid.
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