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Tax
and Superannuation Laws Amendment (2013 Measures No. 2) Bill 2013
Introduced into the House of
Representatives on 20 March 2013
Portfolio: Treasury
Summary of committee view
1.265
The committee
seeks clarification as to:
- whether the
differential treatment of New Zealand non-protected special category visa
holders in Schedule 2 of the bill is justifiable and consistent with the rights
to equality and non-discrimination;
- why the model
proposed in Schedule 5 of the bill to consolidate multiple superannuation accounts
is not predicated on the consent of the member (beneficial owner) of the
accounts; and whether trustees will be subject to the Privacy Act 1988;
- whether the
amendments in Schedule 6 of the bill to reduce the government’s superannuation
co-contribution rate are consistent with the rights to social security and an
adequate standard of living; and
- whether the
amendments in Schedule 6 of the bill to consolidate dependency tax offsets
involve a reduction in the assistance provided via tax offsets for individuals
to support their dependants and if so, what impact this might have on families
and children; and why particular taxpayers will be quarantined from these
changes.
Overview
1.266
This bill will
amend a range of taxation laws to:
- define
‘documentary’ in accordance with the Australian Communications and Media
Authority (ACMA) guidelines and clarify that game shows are ineligible for film
tax offsets (Schedule 1);[1]
- exempt from
income tax certain ex-gratia payments made in relation to natural disasters
during the 2011-12 and 2012-13 financial years (Schedule 2);[2]
- enable entities
who currently pay their goods and services tax (GST) by instalments to continue
to do so if they move into a net refund position (Schedule 3);[3]
- update the list
of deductible gift recipients (Schedule 4);[4]
- require trustees
of particular superannuation funds to establish and implement procedures in
relation to the consolidation of multiple member accounts (Schedule 5);[5]
- reduce the
amount of superannuation co-contribution available from the 2012-13 financial
year (Schedule 6);[6]
- consolidate
dependency tax offsets into the Dependant (Invalid and Carer) Tax Offset from 1
July 2012 (Schedule 7);[7]
and
- clarify the
operation of the taxation of financial arrangements regime (Schedule 8).[8]
Compatibility with human
rights
1.267
The bill is
accompanied by a self-contained statement of compatibility for each Schedule.
The statements for Schedules 2, 3, 4, 6, 7 and 8 conclude that the proposed
amendments do not raise any human rights issues. The statements for Schedules 1
and 5 state that the relevant amendments engage the right to culture and the
rights to social security and health respectively, and conclude that they are
compatible with human rights.
1.268
The
committee agrees that the amendments proposed in Schedules 3, 4 and 8 are
unlikely to raise any human rights concerns.
1.269
The amendments
in Schedules 2, 6 and 7, however, do give rise to human rights concerns and are
discussed below, along with the issues raised in Schedules 1 and 5 of the bill.
Documentaries
and film tax offsets
1.270
Schedule 1 of
the bill will insert a definition of ‘documentary’ that is intended to be
consistent with the definition provided in ACMA's guidelines and also expressly
exclude game shows from eligibility for film tax offsets. The statement of
compatibility explains that tax offsets are:
designed to
encourage expenditure on films in Australia if certain criteria are met.
Some types
of films are not eligible for the offsets at all unless they are a documentary
and some of the criteria are easier to satisfy for documentaries than for other
films. The producer offset, for example, requires a lower minimum level of
qualifying expenditure for documentaries than for other films.[9]
1.271
The amendments
are being introduced because of a recent Administrative Appeals Tribunal
decision which applied a different definition of 'documentary' for the producer
tax offset.
Right
to culture
1.272
Article 15(a) of
the International Covenant on Economic, Social and Cultural Rights (ICESCR)
guarantees the right of everyone to take part in cultural life. As a state
party to the ICESCR, Australia is obliged to take steps to achieve the full
realisation of the right, including those steps necessary for the conservation,
development and diffusion of science and culture.
1.273
The statement of
compatibility argues that the amendments are compatible with the right to
culture in article 15(a) of the ICESCR:
Encouraging
expenditure on films in Australia via tax offsets can be seen as an appropriate
step for the development and diffusion of culture in Australia and
documentaries are more likely than most films to do that because they try
directly to help people understand cultural issues and cultural phenomena.
There being
only limited funding available for promoting the right to culture, it is
appropriate that the film tax offsets target those films where the funding will
have the most effect. It is more likely to have a useful effect if used to
encourage films, such as documentaries, that are more likely to promote the right
to culture, and that are less likely to be made without the offsets than those
that would be made anyway because of their greater commercial viability.[10]
1.274
The statement
notes that the new definition of 'documentary' will apply retrospectively to
tax offsets for films that began their principal photography on or after 1 July
2012 but argues that the changes were foreseeable:
[T]he
amendments, and the application date for them, were announced in the 2012-13
Budget in May 2012. Further, since July 2012, Screen Australia, when providing
certificates to applicants for the producer offset, on the basis of the
Administrative Appeals Tribunal’s understanding of the meaning of
‘documentary’, has also provided them with its view on whether their film is a
documentary under the original understanding of that term. Film makers have
therefore been aware when commencing their films that the Government proposed
to change the law and what the consequences of that change would be for them.
Consequently, the retrospectivity does not produce any disadvantage that film
makers were unaware of.
1.275
In light
of the explanation provided in the statement of compatibility, the committee
considers that the amendments in Schedule 1 of the bill do not appear to give
rise to any significant human rights concerns.
1.276
Schedule 2 of
the bill will amend the Income
Tax Assessment Act 1997 to
list the ex-gratia disaster assistance payments for New Zealand non-protected
special category visa holders as exempt from income tax if it is claimed within
the required time period. It also amends the Act to list the Disaster Income
Recovery Subsidy (DIRS) as exempt from income tax if it is claimed within the
required time period.
1.277
The statement of
compatibility briefly asserts that these measures do not engage any human
rights and that
the amendments are
beneficial to taxpayers.
Rights
to social security and an adequate standard of living
1.278
By exempting the
New Zealand
non-protected special category visa holders from paying income tax on the ex-gratia disaster
assistance payments, the amendments may be seen as contributing to the
enjoyment of the right to social security in article 9 of the ICESCR and the
right to an adequate standard of living in article 11 of the ICESCR.
Rights
to equality and non-discrimination
1.279
The application
of the exemption to only New
Zealand non-protected special category visa holders, however, raises the issue of equality and
non-discrimination in the enjoyment of rights. As this category of ‘resident’ is being treated
differently on the basis of their 'status' as a special category visa holder,
this differential treatment must be demonstrated to have an objective and
reasonable justification to be consistent with the rights to equality and
non-discrimination, which are guaranteed in article 2(2) of the ICESCR as well
as article 26 of the International Covenant on Civil and Political Rights
(ICCPR). The statement of compatibility does not explain why this group is to
be selected for separate treatment over other groups but the explanatory
memorandum indicates that this is because:
New Zealand
citizens who arrived in Australia after 26 February 2001 are
classified as non-protected special category visa holders and are not eligible
for the Australian Government Disaster Recovery Payment. ...
In light of
the hardship [recent] disasters may have caused New Zealand non-protected
special category visa holders, the Government has agreed to make ex-gratia
payments to affected eligible individuals. ...
Exempting
from income tax the ex-gratia payment to New Zealand non-protected special
category visa holders who have been affected by the recent disasters, and any
other natural disasters that may occur before 30 June 2013, ensures
that the payment receives the same taxation treatment as the Australian
Government Disaster Recovery Payment made to eligible individuals.[11]
1.280
The amendments
may therefore be seen as providing equitable tax treatment for this category of
persons. However, it appears that the exemption is intended purely as a one-off
initiative as New Zealand non-protected special category visa holders continue
to remain ineligible for the Australian
Government Disaster Recovery Payment.
1.281
The
committee intends to write to the Assistant Treasurer to seek further
information in relation to how the differential treatment of New Zealand
non-protected special category visa holders is justifiable and consistent with
the rights to equality and non-discrimination.
Consolidation
of multiple superannuation accounts
1.282
Schedule 5 of
the bill will impose new duties on particular superannuation trustees to
establish rules for identifying members with multiple accounts within their
fund on an annual basis and to consider merging those accounts, where they
reasonably believe it is in the best interests of the member to do so, subject
to a practicability test. Trustees will not be required to obtain the consent
of the member before merging the multiple accounts. A first round of
consolidation must be undertaken by 30 June 2014.[12]
Right
to privacy
1.283
The statement of
compatibility acknowledges that the measures to enable trustees to consolidate
multiple superannuation accounts without the consent of the member engage and
limit the right to privacy in article 17 of the ICCPR because they interfere
with the member’s personal affairs.[13]
1.284
The statement
notes that an interference with the right to privacy may be permissible where
it is prescribed by law and is not arbitrary; in other words, the limitation
must be aimed at a legitimate objective and be reasonable, necessary and
proportionate to that objective.
1.285
According to the
statement of compatibility, the amendments are aimed at:
reduc[ing]
the number of unnecessary multiple accounts by merging these accounts within
the same superannuation fund. Consequently, the [amendments] would reduce the
amount affected members pay in multiple sets of administration fees and
insurance premiums, and increase their retirement savings.[14]
In this way,
the statement argues, these measures ‘promote the right to just and favourable
conditions of work in Article 7 of the [ICESCR], particularly Article 7(a)(ii)
in relation to the provision of a decent living for workers and their families,
which is what superannuation is designed to provide following retirement’.[15]
1.286
The statement of
compatibility points to the following safeguards to ensure that the
interference with privacy is reasonable, necessary and proportionate:
- Members’ privacy
interests are protected through having specific conditions that are required to
be satisfied prior to a trustee merging a member’s accounts, namely that the
trustee must reasonably believe that it is in the best interests of the member
to merge the accounts. In determining whether it is in the member’s best
interest, the trustee must consider the total amount of fees and charges
payable by the member.
- While trustees
will not be required to obtain the consent of the member before merging the
separate accounts, if the separate accounts are significant, trustees could
implement a model where members are given notice that the trustee plans to
merge the accounts and the member’s views are sought.
- Trustees are
also required to comply with the notice requirements set out by the Australian
Securities and Investments Commission in relation to material changes or
significant events. Where a trustee makes a decision that fundamentally affects
a member’s investment, including a decision to transfer a member’s benefits
without notice or consent, the trustee must disclose this change or event to
the member either before, or as soon as practicable (but no more than three
months) after the decision.
- In identifying
members with multiple accounts, the Office of the Australian Information
Commissioner has recommended that trustees have regard to the Privacy Act
1988, which regulates the handling of personal information.
1.287
The committee
agrees that the consolidation of multiple superannuation funds is likely to
serve a legitimate objective, namely to protect the funds from being eroded by
fees and charges. Achieving this objective will consequently increase the
amount of retirement savings available to a member, consistent with the right
to just and favourable conditions of work in article 7 of the ICESCR. The
committee notes that the area of superannuation, including the management of
superannuation funds, is also likely to engage the right to social security in
article 9 of the ICECSR and the right to an adequate standard of living in
article 11 of the ICESCR. These changes could therefore be viewed as promoting
the enjoyment of these rights as well.
1.288
The committee
is, however, concerned by the absence of a requirement for consent in the model
proposed. It is not apparent to the committee why a member’s consent could not
be first sought before action is taken to merge their accounts, as this would
appear to be a less restrictive option for achieving the same objectives. Given
the potential for such actions to significantly affect a member’s investments
(as the statement itself acknowledges), requiring the trustee to obtain the
member’s consent first would appear to be an important safeguard to include in
the bill.
1.289
The committee
also notes the Australian Information Commissioner’s recommendation for
trustees to have regard to the Privacy Act 1988 when identifying members
with multiple accounts. However, there does not appear to be any provision in
the bill that subjects trustees to such a requirement.
1.290
The
committee intends to write to the Minister for Financial Services and
Superannuation to seek clarification as to:
- the basis for
adopting a model that does not require a member’s consent to be first obtained
before action is taken to merge their accounts; and
- whether
trustees will be subject to the Privacy Act 1988.
Presumption
of innocence
1.291
Trustees will be
guilty of a strict liability offence if they fail to establish rules setting
out the procedure for the consolidation of members' multiple superannuation
accounts and to execute the procedure annually.[16]
The offence carries a maximum penalty of 50 penalty units.
1.292
Strict liability
offences engage and limit the right to be presumed innocent until proven guilty
in article 14(2) of the ICCPR because they allow for the imposition of criminal
liability without the need to prove fault. The statement of compatibility does
not identify or provide a justification for this offence but the explanatory
memorandum explains that:
The offence
for failing to establish rules setting out the procedure for consolidation of a
member’s superannuation accounts and executing those procedures is a strict
liability offence in order to ensure the integrity of the regulatory regime.
Making it a strict liability offence is also necessary as the matter of whether
the trustee has satisfied their duty under this measure is peculiarly within
the knowledge of the trustee.[17]
1.293
The
committee considers that the strict liability offence in Schedule 5 of the bill
is unlikely to raise issues of incompatibility with article 14(2) of the ICCPR
as it appears to involve matters which are peculiarly within the knowledge of
the defendant and the penalties fall at the lower end of the scale. The
committee, however, re-iterates its expectation, as set out in its Practice
Note 1, that a statement of compatibility should include a discussion of
issues such as the appropriateness of strict liability offences and reverse
onus provisions.
Government
co-contribution for low-income earners
1.294
The explanatory
memorandum to the bill explains that the superannuation government
co-contribution scheme matches eligible personal superannuation contributions
made to a superannuation fund up to a maximum amount. Individuals eligible for
the full rate of this payment have their total income at or below the lower
income threshold. The co‑contribution tapers down for individuals with
total income between the lower and higher income thresholds. The lower income
threshold is indexed but has been frozen at $31,920 for the 2010‑11 and
2011‑12 income years.
1.295
Schedule 6 of
the bill will amend the current scheme to:
- reduce the rate
of payment for the government co-contribution from 100 per cent to 50 per cent;
- decrease the
maximum amount payable from $1,000 to $500;
- extend the
freeze on the indexation of the lower income threshold for the 2012-13 income
year; and
- set the higher
income threshold at $15,000 above the lower income threshold (down from
$30,000).
1.296
The statement of
compatibility briefly asserts that these measures do not engage any human
rights.
Rights
to social security and an adequate standard of living
1.297
The area of
superannuation is likely to engage the right to social security in article 9 of
the ICECSR and the right to an adequate standard of living in article 11 of the
ICESCR. These changes could therefore be viewed as potentially affecting the
enjoyment of these rights.
1.298
As noted above,
the statement of compatibility makes no reference to these rights and it is not
clear if these changes could have an adverse impact on the retirement income of
low-income earners. The explanatory memorandum suggests that:
Eligible
individuals with adjusted taxable income up to $37,000 will benefit from the
low income superannuation contribution (LISC) which is a different payment
available from the 2012-13 income year. Adjusted taxable income is a more
comprehensive income definition to total income as it also included deductions,
tax-free pensions and benefits and deductible child maintenance expenditure.
This LISC pays an amount equivalent to the concessional contributions tax paid
by superannuation funds in respect of low income individuals, up to a maximum
of $500 each year.
The LISC is
a better targeted payment, covering over an estimated five times as many
individuals as the superannuation co‑contribution as a result of these
amendments. It also does not require that low income individuals make
eligible personal superannuation contributions to their superannuation fund,
which increases the coverage of assistance available to low income earners.
Historically, only 20 per cent of the people eligible to receive the
co-contribution make the voluntary contributions required to receive it.[18]
1.299
The
committee intends to write to the Minister for Financial Services and
Superannuation
to seek clarification as to whether these changes could result in a reduction
of superannuation assistance for some low-income earners and, if so, whether
this is consistent with the rights to social security and an adequate standard
of living under article 9 and article 11 of the ICESCR.
Consolidation
of dependency tax offsets
1.300
Schedule 7 of
the bill will consolidate eight existing dependency tax offsets into a single
dependency tax offset for taxpayers maintaining certain classes of dependants
who are unable to work due to invalidity or care obligations. This means that a
taxpayer will no longer be able to receive a tax offset in respect of a
child-housekeeper,[19]
child-housekeeper (with child), housekeeper or housekeeper (with child):
A taxpayer
may only receive the tax offset if they contribute to the maintenance of their
spouse, relative or spouse’s relative, who is genuinely unable to work due to
invalidity or carer obligations.
Consequently,
a taxpayer may no longer receive a tax offset in respect of a housekeeper or
child‑housekeeper as they may not meet the requirement of maintaining a
dependant who is genuinely unable to work.[20]
1.301
The amendments
will preserve the existing dependency tax offsets for taxpayers eligible for
the zone (ie, for people living in rural and remote areas), overseas forces and
overseas civilian tax offsets, which means that:
These
taxpayers: may maintain dependants who are able to work; engage housekeepers
and maintain child housekeepers; and will continue to receive their dependency
tax offset entitlements under existing arrangements, and as an additional
component of their zone, overseas forces or overseas civilian tax offset
entitlement.[21]
1.302
The amendments
will also reflect the impact of the consolidation of the dependency tax offsets
on the net medical expenses tax offset. These changes therefore will ‘reduce a
Government rebate for the out‑of‑pocket cost of medical expenses
and increase the Medicare levy payable for some taxpayers maintaining
dependants who do not work, but who are able to’. [22]
Rights
to social security, an adequate standard of living, health, and family and
children’s rights
1.303
The statement of
compatibility states that these amendments advance ‘the protection of human
rights in relation to health and social security by ensuring that assistance is
better targeted, and [do] not raise any human rights issues’.[23]
1.304
The amendments, however,
appear to reduce the amount of tax offsets available to assist individuals with
dependents and it is unclear what effect this reduction might have on the right to social security and the
right to an adequate standard of living under articles 9 and 11 of the ICESCR
respectively, as well as family and children’s rights more generally.
Similarly, the related reduction in the net medical expenses tax offset and
access to the Medical levy concessions could be viewed as retrogressive or a
limitation on the right to health in article 12 of the ICESCR. It is also unclear why taxpayers
eligible for the zone, overseas forces and overseas civilian tax offsets will
be quarantined from these changes.
1.305
The statement of
compatibility does not explain the potential impact of the changes on families
and children; nor does it provide any justification for the amendments, other
than to simply claim that:
The
consolidation of the dependency tax offsets ... does not alter anybody’s
entitlement to direct assistance through the social security system, and does
not affect anybody’s right to social security.[24]
...
Limiting
access to the net medical expenses tax offset and to the Medicare levy
concessions does not reduce the availability or access to comprehensive medical
services in Australia.[25]
1.306
Before
forming a view on whether these amendments are compatible with human rights,
the committee intends to write to the Assistant Treasurer to seek clarification
as to:
- whether these
changes involve a reduction in the assistance provided via tax offsets for
individuals to support their dependants and if so, what impact this might have
on families and children; and
- why taxpayers
eligible for the zone, overseas forces and overseas civilian tax offsets will
be quarantined from these changes.
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