BILLS DIGEST NO. 88, 2016–17              30 March 2017

Treasury Laws Amendment (Working Holiday Maker Employer Register) Bill 2017

Mary Anne Neilsen
Law and Bills Digest Section 

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]

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[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.