Federal Register of Legislation - Australian Government

Primary content

A Bill for an Act to amend the Income Tax (Seasonal Labour Mobility Program Withholding Tax) Act 2012, and for related purposes
Administered by: Treasury
For authoritative information on the progress of bills and on amendments proposed to them, please see the House of Representatives Votes and Proceedings, and the Journals of the Senate as available on the Parliament House website.
Registered 11 Feb 2022
Introduced HR 09 Feb 2022
Table of contents.

2019-2020-2021-2022

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022
Income Tax Amendment (Labour Mobility Program) Bill 2022

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by authority of the
Assistant Treasurer, Minister for Housing and Minister for Homelessness, Social and Community Housing)

 

 


Table of Contents

Glossary............................................................................................................ iii

General outline and financial impact........................................................... 1

Chapter 1:              Assisting businesses to meet their record-keeping obligations     9

Chapter 2:              Income tax and withholding exemptions for the FIFA Women’s World Cup       19

Chapter 3:              Intangible asset depreciation......................................... 23

Chapter 4:              Unfair contract terms........................................................ 31

Chapter 5:              Recovery grants for Cyclone Seroja............................. 57

Chapter 6:              Tax treatment for new or revised visa programs.......... 61

Chapter 7:              Minor and technical amendments................................. 75

Chapter 8:              Statement of Compatibility with Human Rights.......... 91

 

 

 


This Explanatory Memorandum uses the following abbreviations and acronyms.

Abbreviation

Definition

ACCC

Australian Competition and Consumer Commission

ACL

Australian Consumer Law as set out in Schedule 2 to the Competition and Consumer Act 2010

APRA

Australian Prudential Regulation Authority

ASIC

Australian Securities and Investments Commission

ASIC Act

Australian Securities and Investments Commission Act 2001

ATO

Australian Taxation Office

CCA

Competition and Consumer Act 2010

COVID-19

Coronavirus known as COVID-19

Disaster Recovery Funding Arrangements 2018

Disaster Recovery Funding Arrangements which were set out in a determination made by the then Minister for Law Enforcement and Cyber Security on 5 June 2018

FBT

Fringe benefits tax

FIFA

Fédération Internationale de Football Association (International Federation of Association Football)

FWWC2023 Pty Ltd

Wholly owned FIFA subsidiary established for the purpose of delivering the 2023 FIFA Women’s World Cup 

GST

Goods and services tax

ITAA 1936

Income Tax Assessment Act 1936

ITAA 1997

Income Tax Assessment Act 1997

MYEFO

Mid-Year Economic and Fiscal Outlook

RBA

Reserve Bank of Australia

Registrar

A Registrar appointed under the Business Names Registration Act 2011, the Corporations Act, the Commonwealth Registers Act 2020, or the National Consumer Credit Protection Act 2009.

TAA 1953

Taxation Administration Act 1953

the Bill

Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022

TPD

Total and permanent disability

 

 


General outline and financial impact

Schedule 1 – Assisting businesses to meet their record-keeping obligations

Outline

Schedule 1 to the Bill amends Schedule 1 to the TAA 1953 to empower the Commissioner of Taxation to direct an entity to complete an approved record-keeping course where the Commissioner reasonably believes the entity has failed to comply with its tax-related record-keeping obligations as an alternative to existing financial penalties.

Date of effect

The amendments made by this Schedule commence on the first 1 January, 1 April, 1 July, or 1 October to occur after the day the Bill receives Royal Assent.

The Commissioner of Taxation will be able to issue a tax-records education direction to an entity three months after the day the Bill receives Royal Assent.

Proposal announced

This Schedule implements the Black Economy - Assisting businesses to meet their reporting obligations measure from the 2019-20 MYEFO.

Financial impact

The 2019-20 MYEFO estimated the measure Black Economy - Assisting businesses to meet their reporting obligations ­would have a small but unquantifiable gain to the budget over the forward estimates period.

Human rights implications

This Schedule does not raise human rights issues. See Statement of Compatibility with Human Rights — Chapter 8.

Compliance cost impact

Negligible.

Schedule 2 – Income tax and withholding exemptions for the FIFA Women’s World Cup

Outline

Schedule 2 to the Bill amends the ITAA 1997 and the ITAA 1936 to provide income tax and withholding tax exemptions for FIFA and its wholly owned subsidiary FWWC2023 Pty Ltd for activities associated with delivering the 2023 FIFA Women’s World Cup.

Date of effect

1 July 2020 to 31 December 2028 inclusive.

Financial impact

These amendments are estimated to have an unquantifiable impact on receipts over the forward estimates period.

Human rights implications

This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 8.

Compliance cost impact

Low.

Schedule 3 – Intangible asset depreciation

Outline

Schedule 3 to the Bill amends the ITAA 1997 to provide taxpayers with the choice to self‑assess the effective life of certain intangible depreciating assets they start to hold on or after 1 July 2023, rather than using the statutory effective life currently specified in the law.

Date of effect

The amendments apply to certain intangible depreciating assets that start to be held on or after 1 July 2023.

Proposal announced

This Schedule fully implements the measure Digital Economy Strategy — self-assessing the effective life of intangible depreciating assets from the 2021-22 Budget.

Financial impact

This measure is estimated to have the following receipts impacts on the underlying cash balance over the forward estimates.

All figures in this table represent amounts in $m.

2021-22

2022-23

2023-24

2024-25

-

-

-20.0

-150.0

Human rights implications

This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights — Chapter 8.

Compliance cost impact

Minimal.

Schedule 4 – Unfair contract terms

Outline

Schedule 4 to the Bill amends the CCA, ACL and the ASIC Act to strengthen and clarify the existing unfair contract terms provisions, to reduce the prevalence of unfair contract terms in consumer and small business standard form contracts. The amendments introduce a civil penalty regime prohibiting the use of and reliance on unfair contract terms in standard form contracts. The amendments also expand the class of contracts that are covered by the unfair contract terms provisions.

Date of effect

The amendments in this Schedule commence on the day after the period of 12 months after the Bill receives Royal Assent. This is to enable industry to make any necessary changes prior to commencement.

Proposal announced

This Schedule implements the commitment to reform the unfair contract terms protections announced by the Assistant Treasurer on 10 November 2020.

Financial impact

Nil.

Regulation impact statement

The Regulation Impact Statement covering the amendments in Schedule 4 to the Bill is available at https://treasury.gov.au/publication/p2020-125938.

Human rights implications

This Schedule raises three human rights issues. See Statement of Compatibility with Human Rights — Chapter 8.

Compliance cost impact

The amendments in Schedule 4 to the Bill may result in some businesses re-examining their standard form contracts, although the total regulatory costs are expected to be small. Further detail is provided in the Regulation Impact Statement.

Schedule 5 – Recovery grants for Cyclone Seroja

Outline

Schedule 5 to the Bill amends the ITAA 1997 to provide further support for small businesses and primary producers impacted by Cyclone Seroja in April 2021. This Schedule makes grants received in relation to Cyclone Seroja under Category C of the Disaster Recovery Funding Arrangements 2018 non-assessable and non-exempt income for income tax purposes.

Date of effect

This Schedule applies to grants paid in 2021-2022 and later income years.

Proposal announced

This Schedule fully implements the Cyclone Seroja – tax treatment of qualifying grants measure from the 2021-22 MYEFO.

Financial impact

This Schedule is expected to have no impact on receipts over the forward estimates period.

Human rights implications

This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 8.

Compliance cost impact

This Schedule is unlikely to have more than a minor regulatory impact.

Schedule 6 – Tax treatment for new or revised visa programs and Income Tax Amendment (Labour Mobility Program) Bill 2022

Outline

Schedule 6 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 make amendments to reduce the effective tax rate on certain income earned by foreign resident workers participating in the Australian Agriculture Worker Program or the Pacific Australia Labour Mobility scheme from 32.5 per cent to 15 per cent.

This ensures that such workers pay tax at an appropriate rate on program income, consistent with similar migration programs.

Date of effect

The amendments apply in relation to salary, wages, commission, bonuses or allowances paid to an employee under a relevant program on or after 1 March 2022.

Proposal announced

Schedule 6 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 partially implement two measures, Pacific Labour Mobility – reforms and Australian Agriculture Visa, from the 2021-22 MYEFO.

Financial impact

The Pacific Labour Mobility measure was estimated to increase receipts by $165.0 million over the forward estimates period.

All figures in this table represent amounts in $[m].

2021-22

2022-23

2023-24

2024-25

40.0

45.0

40.0

40.0

The estimate reflects the tax that is expected to be paid at the proposed rates by workers participating in the new Pacific Australia Labour Mobility scheme and the expansion of the Pacific Labour scheme. This estimate includes an increase in GST receipts of $50.0 million over the forward estimates period that will subsequently be paid to the States and Territories.

The Australian Agriculture Visa measure was estimated to increase receipts by $150.0 million over the forward estimates period.

All figures in this table represent amounts in $[m].

2021-22

2022-23

2023-24

2024-25

..

25.0

60.0

65.0

..  not zero, but rounded to zero

This estimate reflects the tax that is expected to be paid at the proposed rates by workers arriving in Australia to participate in the program. The estimate includes an increase in GST receipts of $35.0 million over the forward estimates period that will subsequently be paid to the States and Territories.

Regulation impact statement

A regulation impact statement is not required for these measures.

Human rights implications

This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 8.

Compliance cost impact

The measures are expected to result in a negligible impact on compliance costs, as the proposed taxation arrangements are broadly consistent with existing taxation arrangements.

Schedule 7 – Minor and technical amendments

Outline

Schedule 7 to the Bill makes minor and technical amendments to various laws in the Treasury, Social Services and Veterans’ Affairs portfolios.

Date of effect

Part 1, items 9 and 13 of Part 2, Part 4 and Part 5 of Schedule 7 to the Bill commence the day after the Bill receives Royal Assent.

Item 10 of Part 2 of Schedule 7 to the Bill commences immediately after item 359 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 commences.

Item 11 of Part 2 of Schedule 7 to the Bill commences immediately after item 1315 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 commences.

Item 12 of Part 2 of Schedule 7 to the Bill commences immediately after item 1414 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 commences.

Part 3 of Schedule 7 to the Bill commences at the start of the first quarter occurring after the Bill receives Royal Assent.

Proposal announced

This Schedule fully implements the miscellaneous and technical amendments measure announced on 2 December 2021.

Financial impact

The financial impact is unquantifiable but expected to be small.

Human rights implications

This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 8.

Compliance cost impact

This Schedule has no compliance cost impact.

 


Table of Contents:

Outline of chapter 9

Context of amendments. 10

Record-keeping. 10

The Black Economy Taskforce. 10

Summary of new law.. 11

Comparison of key features of new law and current law.. 12

Detailed explanation of new law.. 12

Tax-records education direction.. 12

Recipients of the tax-records education direction.. 13

Circumstances when a tax-records education direction may be given.. 14

Consequences of not complying with the tax-records education direction   16

Administration of the tax-records education direction.. 16

Consequential amendments. 17

Application and transitional provisions. 17

 

 

Outline of chapter

1.1              Schedule 1 to the Bill amends Schedule 1 to the TAA 1953 to empower the Commissioner of Taxation to direct an entity to complete an approved record-keeping course where the Commissioner reasonably believes the entity has failed to comply with its tax-related record‑keeping obligations as an alternative to existing financial penalties.

Context of amendments

Record-keeping

1.2              In the normal course of carrying on a business, entities are required to keep and retain records of the transactions they enter into. The scope of these record‑keeping obligations depends on the nature, size, and the structure of a business.

1.3              These record-keeping obligations span across different Commonwealth taxation laws. In general, the record-keeping provisions under taxation law require entities carrying on a business or subject to indirect tax obligations to keep records that record and explain transactions, and other acts related to their tax affairs; which enable their tax liability to be readily ascertained. These records must be in English or must be readily accessible and easily convertible into English.

1.4              Generally, these records must be kept for 5 years after they are prepared or obtained, or 5 years after the completion of the transaction or acts to which they relate to (whichever is later).

1.5              Currently, where an entity is required to keep or retain records under a taxation law and fails to keep or retain records in the manner required by that law, they will be liable to an administrative penalty under section 288-25 in Schedule 1 to the TAA 1953. However, this administrative penalty does not apply to record-keeping obligations under certain taxation laws: 

·                     Part X of the Fringe Benefits Tax Assessment Act 1986 – includes record-keeping obligations related to retention of statutory evidentiary documents; and

·                     Division 900 of the ITAA 1997 – includes record-keeping obligations related to keeping and retaining documents required to substantiate expenses.

1.6              Under section 298-20 in Schedule 1 to the TAA 1953, the Commissioner of Taxation may remit all or part of an administrative penalty including record keeping penalties imposed by section 288-25 in Schedule 1 to the TAA 1953.

The Black Economy Taskforce

1.7              The Black Economy Taskforce (the Taskforce) was established in 2016 to develop a policy response to combat the black economy in Australia, recognising that these issues cannot be tackled by traditional law enforcement measures alone.

1.8              The Taskforce’s Final Report (the Report) found that some entities carrying on businesses have difficulty complying with their record-keeping obligations. This results in omitted income being added to the black economy. The Report recommended that the requirements for tax-related record-keeping obligations should be clear and simple for entities carrying on businesses, and penalties for breaches of these rules should be designed so that the ATO has a range of administrative sanctions available at its discretion.

1.9              In response to the Taskforce’s Report, the Government agreed that the requirements for tax record-keeping should be clear and simple, and that entities carrying on businesses should adhere to strong record-keeping practices. The measure Black Economy – assisting businesses to meet their reporting obligations was announced in the 2019-20 MYEFO.

Summary of new law

1.10          The amendments empower the Commissioner of Taxation to issue a tax-records education direction requiring an entity to complete an approved record-keeping course where the Commissioner reasonably believes that there has been a failure to comply with one or more specified record-keeping obligations under a taxation law.

1.11          The tax-records education direction seeks to directly address the knowledge gaps and reduce cases of non-compliance with record keeping obligations by helping entities better understand their tax-related record-keeping obligations.

1.12          The key features of the tax-records education direction are as follows:

·                     The Commissioner can issue a direction to an entity if the Commissioner reasonably believes the entity has failed to comply with one or more of its record-keeping obligations under a taxation law, excluding certain exempt obligations.

·                     An entity that has received a tax-records education direction must complete or arrange for an appropriate person to complete the approved course of education and provide proof of completion to the Commissioner.

·                     The tax-records education direction operates as an alternative to the administrative penalties that apply where an entity has failed to meet its record-keeping obligations under a taxation law.

·                     If the entity complies with the tax-records education direction, they will not be liable to the administrative penalty for failing to meet their record-keeping obligations.

·                     If the entity does not comply with the requirements of a tax-records education direction, they will be liable to the original administrative penalty.

1.13          The Commissioner may only issue a direction to an entity which the Commissioner reasonably believes is not disengaged or deliberately avoiding their record-keeping obligations.

Comparison of key features of new law and current law

Table 1.1 Comparison of new law and current law

New law

Current law

An entity is generally liable to an administrative penalty where it fails to comply with its record-keeping obligations under a taxation law. As an alternative to the administrative penalty, the Commissioner of Taxation may direct an entity (including an individual operating as a sole trader) to undertake an approved record-keeping course where the Commissioner reasonably believes that entity has failed to comply with its record-keeping obligations under a taxation law.

An entity is liable to an administrative penalty where it fails to comply with its record-keeping obligations under a taxation law.

Detailed explanation of new law

1.14          The tax-records education direction will be implemented as part of the existing education direction framework as set out in Division 384 in Schedule 1 to the TAA 1953.

Tax-records education direction

1.15          The Commissioner of Taxation may issue a tax-records education direction to an entity if the Commissioner reasonably believes that the entity has failed to comply with one or more of its record-keeping obligations under a taxation law as an alternative to an administrative penalty. The tax-records education direction requires the recipient to undertake (or arrange for an appropriate person within the entity to undertake) an approved course of education specified by the Commissioner and provide the Commissioner with evidence of completion of the course.
[Schedule 1, items 9 and 16, section 384-12 in Schedule 1 to the TAA 1953, and definition of ‘tax-records education direction’ in section 995-1(1) of the ITAA 1997]

1.16          An entity’s failure to keep appropriate records can occur for a variety of reasons including unintentional mistakes, knowledge gaps, or variations in levels of digital literacy. The purpose of the tax-records education direction is to address these knowledge gaps and reduce cases of non-compliance through the use of an approved course of education which will help entities better understand their tax-related record-keeping obligations.

1.17          The tax-records education direction will operate as an alternative to the existing administrative penalty that applies where an entity has failed to meet its record-keeping obligations under a taxation law. This supports the recommendation outlined in the Taskforce’s Report for the ATO to have a range of administrative sanctions at its discretion.
[Schedule 1, item 1 and 2, section 288-25(2)(c) in Schedule 1 to the TAA 1953]

1.18          This means where an entity undertakes or, if the entity is not an individual, arranges for a person involved in the significant decision-making processes of the entity to undertake, the approved course of education and provides evidence of completion of the course to the Commissioner of Taxation, the entity will not be liable to pay the administrative penalty under section 288-25 in Schedule 1 to the TAA 1953.

1.19          In this way, the tax-records education direction provides an alternative for the entity that allows the entity to avoid administrative penalties. The administrative penalty will not apply if the approved course of education is completed before the end of the specified period and if evidence of completion is provided to the Commissioner of Taxation. This will encourage entities to undertake the education course and gain a better understanding of their record‑keeping obligations.

Recipients of the tax-records education direction

1.20          The tax-records education direction is intended to address the knowledge gaps and reduce cases of non-compliance by helping entities better understand their tax-related record-keeping obligations. It is expected that the tax-records education direction will principally be exercised in the context of entities carrying on a business, and in particular small business entities.

1.21          As such, the Commissioner of Taxation may issue the tax-records education direction to an entity that is carrying on a business. For example, the tax‑records education direction may be issued to a sole trader where the Commissioner reasonably believes the sole trader has failed to comply with one or more of its record-keeping obligations under a taxation law.

1.22          As an entity other than an individual cannot complete the course of education, the law requires that an individual undertakes the course of education. In the case of a sole trader, the individual acting as the sole trader should complete the course of education. In all other cases, the entity must ensure an individual who makes or participates in making decisions that affect the whole or a substantial part of their activities undertakes the approved course of education. [Schedule 1, items 10, section 384-15 in Schedule 1 to the TAA 1953]

1.23          The tax-records education direction is not available to entities that are disengaged from the tax system or those who deliberately avoid their record‑keeping obligations under a taxation law. As the purpose of the tax-records education direction is to facilitate a better understanding of record‑keeping obligations, financial penalties and, in cases of serious non-compliance, other criminal sanctions, are the appropriate penalty for those disengaged from the tax system or those that deliberately avoid their record‑keeping obligations. [Schedule 1, item 9, section 384-12(2) in Schedule 1 to the TAA 1953]

1.24          However, the Commissioner of Taxation will issue a tax-records education direction to an entity where the Commissioner reasonably believes that the entity has made a reasonable and genuine attempt to comply with, or believed they were complying with their record-keeping obligations.

Circumstances when a tax-records education direction may be given

1.25          The tax-records education direction can be given where an entity has failed to comply with one or more of its record-keeping obligations under a taxation law, with some exclusions. The education direction will specify these record‑keeping failures and the time or period of the failure.
[Schedule 1, item 9, section 384-12(1) in Schedule 1 to the TAA 1953]

1.26          The tax-records education direction cannot be issued for record-keeping obligations under a taxation law where non-compliance with those obligations is excluded from giving rise to an administrative penalty under section 288-25 in Schedule 1 to the TAA 1953 (see above).
[Schedule 1, item 9, section 384-12(1) in Schedule 1 to the TAA 1953
]

1.27          Specifically, a tax-records education direction cannot be issued in relation to a failure to comply with a record-keeping obligation under:

·                     Part X of the Fringe Benefits Tax Assessment Act 1986; or

·                     Division 900 of the ITAA 1997.

1.28          As these record-keeping obligations do not give rise to an administrative penalty, the tax-records education direction cannot be used as an alternative to the administrative penalty in this instance.

1.29          Further, the tax-records education direction cannot be issued to an entity that has failed to comply with its record-keeping obligations under the Superannuation Guarantee (Administration) Act 1992. This is because a failure to comply with an obligation to keep records under that Act is separately covered by the superannuation guarantee education direction.
[Schedule 1, items 9 and 16, section 384-12(1) in Schedule 1 to the TAA 1953, and definition of ‘superannuation guarantee education direction’ in section 995-1(1) of the ITAA 1997]

1.30          The superannuation guarantee education direction is centred on broader compliance with an employer’s obligations under the Superannuation Guarantee (Administration) Act 1992. It also has different requirements to the tax-records education direction. A key distinguishing feature of the superannuation guarantee education direction is that a failure to comply with superannuation guarantee education direction is an absolute liability offence under section 8C of the TAA 1953. Further, a failure to comply with the superannuation guarantee education direction results in an administrative liability of 5 penalty units.

1.31          Conversely, a failure to comply with the tax-records education direction does not constitute an offence under section 8C of the TAA 1953. Rather, where an entity fails to comply with the requirements of a tax-records education direction, they will be liable to the original administrative penalty set out in section 288-25 in Schedule 1 to the TAA 1953 (see below). That is, there are no additional penalties applied if an entity does not comply with a tax-records education direction.

1.32          As the tax-records and the superannuation guarantee education directions have different requirements, it is appropriate for them to operate separately. As such, Schedule 1 to the Bill makes minor amendments to Division 384 in Schedule 1 to the TAA 1953 to effectively separate these education directions.
[Schedule 1, items 4, 5, 6, 7 and 8, section 384-10 in Schedule 1 to the TAA 1953]

1.33          Schedule 1 to the Bill does not amend the existing operation of the superannuation guarantee education direction. Particularly, it does not amend how consequences for the failure to comply with the superannuation guarantee education direction operate and are treated under section 8C of the TAA 1953. These compliance provisions are now set out in section 384-17 in Schedule 1 to the TAA 1953. [Schedule 1, item 10, section 384-17 in Schedule 1 to the TAA 1953]

Consequences of not complying with the tax-records education direction

1.34          The entity that is given a tax-records education direction must complete or arrange for the completion of the approved course of education before the end of the specified period as set out in the written direction. Further, the entity must provide the Commissioner of Taxation with evidence of completion of the course.
[Schedule 1, item 10, section 384-15(3) in Schedule 1 to the TAA 1953]

1.35          If an entity fails to comply with these requirements of the tax-records education direction, they will be liable to the original administrative penalty as set out in section 288-25 in Schedule 1 to the TAA 1953.
[Schedule 1, item 1 and 2, section 288-25(2)(c) in Schedule 1 to the TAA 1953]

1.36          This approach ensures that the tax-records education direction operates as an alternative to the administrative penalty and entities are encouraged to comply with the requirements of the tax-records education direction, without being further penalised if they choose not to undertake the course. This ensures that entities are encouraged to comply with the requirements of the tax-records education direction – which will help them better understand their record-keeping obligations, and by extension assist them with accurately reporting their tax-related liabilities.

Administration of the tax-records education direction 

1.37          A tax-records education direction given by the Commissioner of Taxation will not be a legislative instrument within the meaning of section 8 of the Legislation Act 2003.

1.38          Insofar as the tax-records education direction is intended to assist entities meet their record-keeping obligations, they are not intended to determine or alter the law and is therefore not of a legislative character. Further, this approach is consistent with the existing education direction framework administered as set out in Division 384 in Schedule 1 to the TAA 1953 where such directions are not legislative instruments either.

1.39          The tax-records education direction will be implemented through and administered in accordance with the existing operational rules that are set out in Division 384 in Schedule 1 to the TAA 1953. This includes operational rules related to:

·                     approval of courses of education;

·                     variation or revocation of an education direction on Commissioner’s own initiative;

·                     variation of an education direction on a recipient’s request; and

·                     a recipient’s objection rights to an education direction.

[Schedule 1, items 11, 12, 13, 14, and 15, sections 384-20(1), 384-30, 384‑25(1) and (7), and 384-40(a) in Schedule 1 to the TAA 1953]

1.40          As such, this means that a recipient of the tax-records education direction can object to the Commissioner of Taxation’s decision to issue a direction, vary a direction, or refuse to vary a direction on the recipient’s request by making a request in accordance with Part IVC of the TAA 1953. [Schedule 1, item 15, section 384-40(a) in Schedule 1 to the TAA 1953]

1.41          The Commissioner of Taxation’s decision to issue or vary a tax-records education direction will be exempt from the operation of the Administrative Decisions (Judicial Review) Act 1977. This approach is consistent with how the Commissioner’s decision to issue or vary superannuation guarantee education direction is treated under the Administrative Decisions (Judicial Review) Act 1997. This is appropriate as entities are provided with full review rights under Part IVC of the TAA 1953 which is a well‑established and comprehensive review scheme for taxation decisions. Part IVC review is equally as accessible and effective as review under the Administrative Decisions (Judicial Review) Act 1977.

Consequential amendments

1.42          Part 2 of Schedule 1 to the Bill makes minor consequential amendments to the TAA 1953 to reflect that the compliance provisions with respect to superannuation guarantee education direction are now set out in section 384‑17 in Schedule 1 to the TAA 1953.
[Schedule 1, items 17 and 18, section 8C(1)(fa) of the TAA 1953, and section 298-5(c) in Schedule 1 to the TAA 1953]

Application and transitional provisions

1.43          The Commissioner of Taxation will be able to issue a tax-records education direction to an entity three months after the day the Bill receives Royal Assent.
[Schedule 1, item 19]

1.44          The amendments apply to failures to comply with record-keeping obligations under a taxation law that occur both before and after the Bill receives Royal Assent.

1.45          Providing the Commissioner of Taxation with the ability to issue a tax-records education direction in relation to breaches of record keeping obligations that occurred before the commencement of the Bill is appropriate and wholly beneficial to businesses. This is because the amendments will allow entities to choose to complete the approved record-keeping education course as an alternative to paying the financial administrative penalties if they wish.

1.46          The transitional provision ensures that an education direction given in relation to a failure to comply with an obligation to keep records under the Superannuation Guarantee (Administration) Act 1992, before the commencement of Schedule 1 to the Bill, will continue in force (and will be dealt with) as if it had been given under the requirements of superannuation guarantee education direction, as amended by Part 1 of this Schedule.
[Schedule 1, item 20]


Table of Contents:

Outline of chapter 19

Context of amendments. 19

Summary of new law.. 20

Detailed explanation of new law.. 20

Commencement, application, and transitional provisions. 21

Commencement 21

Application.. 21

 

 

Outline of chapter

2.1              Schedule 2 to the Bill amends the ITAA 1997 and the ITAA 1936 to provide income tax and withholding tax exemptions for FIFA and its wholly owned subsidiary associated with delivering the 2023 FIFA Women’s World Cup.

Context of amendments

2.2              As part of Australia’s bid to co-host the 2023 FIFA Women’s World Cup, the Government committed to providing FIFA and a locally established Australian subsidiary (FWWC2023 Pty Ltd) with certain tax exemptions for activities associated with the 2023 FIFA Women’s World Cup.

2.3              Section 50-45 of the ITAA 1997 provides income tax exemptions for entities in the sporting, cultural, film and recreational fields. This section supports the encouragement and development of sport, culture, film, and recreation in Australia.

2.4              Prior to these amendments, FIFA and its wholly owned subsidiary were not entitled to income tax exempt status in Australia.

2.5              The income and withholding tax exemptions provided in the Bill are consistent with and informed by the precedent set by the tax exemptions provided to the International Cricket Council for the T20 World Cup.

2.6              An income tax exemption has previously been provided to the International Cricket Council for the T20 Cricket World Cup under section 50-45 of the ITAA 1997.

Summary of new law

2.7              The Bill provides income tax and withholding exemptions for FIFA and FWWC2023 Pty Ltd for a specific period to support the hosting and delivery of the 2023 FIFA Women’s World Cup.

2.8              This is achieved by amending the ITAA 1997 and the ITAA 1936.

Detailed explanation of new law

2.9              The Bill amends the ITAA 1936 to provide an exemption from withholding tax for FIFA and FWWC2023 Pty Ltd.
[Schedule 2, item 1, section 128B(3)(a)(i) of the ITAA 1936]

2.10          The Bill amends the ITAA 1997 to add FIFA and FWWC2023 Pty Ltd to the table that lists tax-exempt entities in the tax law.
[Schedule 2, item 2, (table item headed “sports, culture or recreation”) of section 11(5) of the ITAA 1997]

2.11          The income tax exemption applies for a fixed period, which is linked to undertaking and delivering the 2023 FIFA Women’s World Cup.
[Schedule 2, item 3, section 50-45 of the ITAA 1997]

2.12          The effect of the Bill is that FIFA and FWWC2023 Pty Ltd are exempt from paying tax on ordinary or statutory income from 1 July 2020 to 31 December 2028 inclusive, provided their income (ordinary or statutory) relates to the 2023 FIFA Women’s World Cup.
[Schedule 2, item 3, section 50‑45 of the ITAA 1997]

Commencement, application, and transitional provisions

Commencement

2.13          The amendments commence on the first day of the first quarter following Royal Assent of the Bill.
[Clause 2]

Application

2.14          The income tax and tax withholding exemptions apply from 1 July 2020 to 31 December 2028 inclusive. This covers the intended period of operation of activities to support planning for, operation of and winding up of activities arising from the 2023 FIFA Women’s World Cup.
[Schedule 2, item 3, paragraph (a) of table item 9.4 and paragraph (b) of table item 9.5 of section 50-45 of the ITAA 1997]

2.15          Although the exemptions apply retrospectively from 1 July 2020, they are wholly beneficial to the affected entities as they ensure that no income tax is payable on specified income and they also exempt certain withholding tax obligations.

 


Table of Contents:

Outline of chapter 23

Context of amendments. 23

Summary of new law.. 24

Comparison of key features of new law and current law.. 25

Detailed explanation of new law.. 26

Associate and same user rules. 27

Recalculation of effective life. 28

Consequential amendments. 29

Adjustment to the prime cost method formula. 29

Tax cost setting under the consolidation regime. 29

Minor and technical amendments. 30

Application and transitional provisions. 30

 

 

Outline of chapter

3.1              Schedule 3 to the Bill amends the ITAA 1997 to provide the choice to self‑assess the effective life of certain intangible depreciating assets rather than using the statutory effective life in working out the decline in value.

Context of amendments

3.2              The current law mandates the effective life to be used for certain intangible depreciating assets in calculating their decline in value, which may not necessarily reflect the period of time that the assets provide economic benefits to the taxpayer.

3.3              In the 2021-22 Budget, the Government announced the Digital Economy Strategy, which outlines actions and policies the Government is taking to grow Australia’s future as a modern and leading digital economy by 2030. The Strategy includes measures to empower businesses to grow investment in digital technologies, one of which is to allow taxpayers to self‑assess the effective life of certain intangible depreciating assets.

3.4              The amendments to provide the choice to self-assess the effective life of certain intangible depreciating assets will better align the taxation treatment of those assets with the actual period of time that the assets provide economic benefits. It also aligns the treatment of those intangible depreciating assets with that of tangible assets.

3.5              The amendments will apply to eligible assets that start to be held on or after 1 July 2023, that is, immediately after the temporary full expensing regime concludes. (The temporary full expensing regime is currently legislated to end on 30 June 2022, with an announced extension to 30 June 2023.) Temporary full expensing enables eligible businesses to claim an immediate deduction for the business portion of the cost of an eligible asset in the year it is first used or installed ready for use for a taxable purpose, rather than over the asset’s effective life.

Summary of new law

3.6              The new law allows a taxpayer to choose to self-assess the effective life of intangible depreciating assets listed in the table in subsection 40‑95(7) rather than using the statutory effective life specified in the table. The choice can be made in relation to intangible assets the taxpayer starts to hold on or after 1 July 2023. The intangible assets to which this choice applies are:

·                     a standard patent;

·                     an innovation patent;

·                     a registered design;

·                     a copyright (except copyright in film);

·                     a licence (except one relating to a copyright or in‑house software);

·                     a licence relating to a copyright (except copyright in a film);

·                     in‑house software;

·                     a spectrum licence; and

·                     a telecommunications site access right.

3.7              The effective life is used to calculate the decline in value of the intangible asset.

3.8              The new law also allows the taxpayer to recalculate the effective life in later income years if the effective life the taxpayer has been using is no longer accurate because of changed circumstances relating to the nature of the asset's use.

3.9              If the cost of the asset increases by at least 10 per cent in a later income year the taxpayer must recalculate the effective life of the asset.

3.10          The taxpayer must also recalculate the effective life of the asset for the income year that the taxpayer starts to hold it if:

·                     the taxpayer is using an effective life because of the associate or same user rule in subsection 40‑95(4) or (5); and

·                     the asset's cost increases after the taxpayer starts to hold it in that year by at least 10 per cent.

Comparison of key features of new law and current law

Table 3.1 Comparison of new law and current law

New law

Current law

To calculate the decline in value of certain intangible depreciating assets, a holder of the asset can choose to self‑assess the effective life rather than use the statutory effective life.

To calculate the decline in value of certain intangible depreciating assets, a holder of the asset must use the statutory effective life.

Unless the asset is copyright, licence relating to copyright or in‑house software, a subsequent holder of certain intangible depreciating assets must use the remaining statutory effective life for the prime cost method formula, if the holder does not choose to self‑assess the effective life.

Unless the asset is copyright, licence relating to copyright or in‑house software, a subsequent holder of certain intangible depreciating assets must use the number of years remaining in the effective life of the former holders for the prime cost method formula.

If a subsequent holder of certain intangible depreciating assets self‑assesses the effective life of the asset, the holder is not able to adjust the prime cost method formula.

No equivalent.

If in a later income year, the effective life used for certain intangible depreciating assets is no longer accurate due to a change in circumstances relating to the nature of the use of the asset, a holder of the asset is able to recalculate the effective life.

A holder of the asset is not able to recalculate the effective life.

If the cost of the intangible depreciating asset increases by at least 10 per cent in a later income year, a holder of the asset must recalculate the effective life.

A holder of the asset is not able to recalculate the effective life.

A new holder must recalculate the effective life for the income year that they start to hold certain intangible depreciating assets, if the cost of the asset increases by at least 10 per cent and the asset:

·           is acquired from an associate;

·           continues to be used by the former user; or

·           has a new user who is an associate of the former user.

A holder of the asset is not able to recalculate the effective life.

Detailed explanation of new law

3.11          The amendments provide a taxpayer with the ability to choose to self‑assess the effective life of certain intangible depreciating assets they hold on or after 1 July 2023, or apply the existing statutory effective life specified in the table in subsection 40‑95(7). The effective life is then used in calculating the decline in value of the intangible depreciating asset.
[Schedule 3, items 8, 10 and 12, subsections 40‑95(7), (7A) and (7B), and paragraph 40‑105(4)(a)]

3.12          Paragraph 40-105(4)(a) applies to assets that start to be held before, on, or after 1 July 2023 which have effective lives in accordance with the table in subsection 40-95(7) and the effective life is not being recalculated. However, it does not prevent a taxpayer from choosing to self-assess the effective life under subsections 40-95(7) and (7A) of an asset the taxpayer starts to hold on or after 1 July 2023.

3.13          In self‑assessing the effective life of the asset, the taxpayer must work out the effective life in accordance with section 40‑105, which includes taking into account:

·                     how they expect to use the asset;

·                     the estimated period of time that the asset can be used by any entity to derive income at its start time (for a taxable purpose, for producing exempt income and non-assessable non‑exempt income or for the purpose of conducting research and development activities);

·                     the term of the asset and any options available for extension or renewal of that term; and

·                     the estimated time when the asset is likely to be scrapped, or sold for no more than scrap value or abandoned.

[Schedule 3, item 11, subsection 40-105(1C)]

3.14          A depreciating asset starts to decline in value from its start time, which is generally when the taxpayer first uses the asset or has installed the asset ready for use for any purpose.

3.15          Where the holder of an intangible depreciating asset specified in the table in subsection 40-95(7) has exclusive rights to exploit that asset, the exercise of those rights may include preventing unauthorised use by another person.

3.16          If the taxpayer chooses to self‑assess the intangible depreciating asset’s effective life, the choice must be made for the income year in which the asset’s start time occurs.
[Schedule 3, item 10, subsection 40‑95(7A)]

3.17          The choice must be made by the day the taxpayer lodges their income tax return for the income year unless a later time is allowed by the Commissioner of Taxation.

3.18          The choice applies to that income year and all later income years, except where a choice is made to recalculate the effective life, or where the taxpayer must recalculate the effective life (see paragraphs 3.22 to 3.26).

Associate and same user rules

3.19          Subsections 40‑95(4) and (5) continue to oblige a taxpayer to use an effective life equal to the effective life of the former holder that is yet to elapse at the time the new holder starts to hold the asset if a depreciating asset:

·                     is acquired from an associate, who has deducted or can deduct the decline in value of the asset;

·                     continues to be used by the same user; or

·                     has a new user who is an associate of the former user.

3.20          These rules will apply consistently to intangible depreciating assets listed in the table in subsection 40‑95(7) that a taxpayer starts to hold on or after 1 July 2023. Consequently, the new holder of the asset does not have the choice to self‑assess the effective life of the asset or use the statutory effective life in the table in subsection 40‑95(7).
[Schedule 3, item 10, subsection 40-95(7B)]

Example 3.1  

Amy acquired a standard patent on 1 July 2024 for $150,000. She self‑assesses the effective life of the standard patent to be 15 years and works out the decline in value to be $10,000 per annum.

Amy deducts the decline in value of the standard patent for the 2024‑25, 2025‑26 and 2026‑27 income years.

On 1 July 2027, Amy sells the standard patent for $120,000 to an associate, Michael.

Michael is not able to choose to self‑assess the effective life or use the statutory effective life for the standard patent, because the associate rule in subsection 40‑95(4) would apply to him. He must use the effective life Amy has been using that is yet to elapse at the time he starts to hold the standard patent.

On 1 July 2027, there are 12 years yet to elapse on the effective life that Amy has been using, so Michael must use an effective life of 12 years for the standard patent in working out his decline in value.

3.21          However, the new holder must use the effective life applicable to the asset in the table in subsection 40‑95(7), where the asset continues to be used by the former user or has a new user who is an associate of the former user and:

·                     the new holder does not know and cannot readily find out which effective life the former holder was using; or

·                     the former holder did not use an effective life.

[Schedule 3, items 6 and 7, subsections 40‑95(6) and (6A)]

Recalculation of effective life

3.22          Where there are changes in a later income year to the circumstances relating to the nature of the use of an intangible asset that is in the table in subsection 40‑95(7) that the taxpayer starts to hold on or after 1 July 2023, the effective life of the asset may be recalculated. This is only available where the change in use makes the effective life that is being used inaccurate.
[Schedule 3, item 15, subsection 40‑110(5)]

3.23          If the cost of the asset increases by at least 10 per cent in a later income year the taxpayer must recalculate the asset’s effective life.
[Schedule 3, items 13 to 15, subparagraphs 40‑110(2)(a)(iii) and (iv), and subsection 40‑110(5)]

3.24          The taxpayer must also recalculate the effective life of the asset for the income year that the taxpayer starts to hold it if:

·                     the taxpayer is using an effective life because of the associate or same user rule in subsection 40‑95(4) or (5); and

·                     the asset’s cost increases after the taxpayer starts to hold it in that year by at least 10 per cent.
[Schedule 3, item 15, subsection 40‑110(5)]

3.25          This treatment is consistent with the treatment of tangible depreciating assets.

3.26          A recalculation of the effective life of an intangible depreciating asset that a taxpayer starts to hold on or after 1 July 2023 must be done under section 40‑105 using self‑assessment (see paragraph 3.13).

Consequential amendments

Adjustment to the prime cost method formula

3.27          If a holder of an intangible depreciating asset is not the first holder of the asset subsections 40‑75(5) and (6) provide that the new holder needs to adjust the prime cost method formula to take into account the period that all former holders have held the asset. This adjustment does not apply to copyright, a licence relating to copyright or in‑house software.

3.28          That is, instead of using the statutory effective life in the table in subsection 40‑95(7), the new holder must use the period remaining in that effective life as at the time the holder starts to hold the asset.

3.29          Subsections 40‑75(5) and (6) are being amended to ensure that the adjustment applies only in situations where the new holder uses the statutory effective life specified in the table in subsection 40‑95(7). This is the case regardless of whether the former holder used the statutory effective life or self‑assessed effective life.
[Schedule 3, items 1 to 5, subsections 40‑75(5) and (6)]

Tax cost setting under the consolidation regime

3.30          When an entity joins or leaves a consolidated group its assets become or cease to be the assets of the group. The tax cost of the asset of the head company or leaving entity is set at the asset’s tax cost setting amount.

3.31          The meaning of tax cost is set in section 701‑55 is being amended so that it continues to apply appropriately to intangible depreciating assets listed in the table in subsection 40‑95(7).
[Schedule 3, items 16 to 18, paragraph 701-55(2)(d)]

Minor and technical amendments

3.32          The table in subsection 40‑95(7) is amended to remove the table item for petty patents. The petty patent system was replaced with the innovation patent system in 2001. There are no longer any petty patents that the depreciation rules could apply to.
[Schedule 3, item 9, table item 3 of subsections 40‑95(7)]

Application and transitional provisions

3.33          The new law applies to intangible depreciating assets, listed in the table in subsection 40‑95(7), that a taxpayer starts to hold on or after 1 July 2023. That is, the current law continues to apply to the intangible depreciating assets that a taxpayer holds before 1 July 2023.
[Schedule 3, items 8, 12 and 15, subsection 40‑95(7), paragraph 40‑105(4)(a) and subsection 40‑110(5)]

3.34          In this regard, the new law is beneficial to affected taxpayers as it allows taxpayers to choose an effective life for an intangible depreciating asset that reflects the actual economic life of the asset, rather than using the statutory effective life.

 


Table of Contents:

Outline of chapter 32

Context of amendments. 32

Unfair contract terms. 32

Reviews of the unfair contract terms regime. 33

Summary of new law.. 34

Comparison of key features of new law and current law.. 35

Detailed explanation of new law.. 38

Prohibiting the use, application of or reliance on an unfair contract term   38

Remedies available under the unfair contract terms regime. 39

Determining what is a standard form contract 44

Definition of a small business contract 45

Minimum standards provisions. 47

Contracts excluded from the unfair contract terms provisions. 49

Certain life insurance contracts. 50

Provisions referring to non-party consumers. 53

Review of operation of the provisions. 53

Other amendments. 54

Application and transitional provisions. 54

 

 


 

Outline of chapter

4.1              Schedule 4 to the Bill amends the CCA, ACL and the ASIC Act to strengthen and clarify the existing unfair contract terms provisions and to reduce the prevalence of unfair contract terms in consumer and small business standard form contracts. The amendments introduce a civil penalty regime prohibiting the use of and reliance on unfair contract terms in standard form contracts. The amendments also expand the class of contracts that are covered by the unfair contract terms provisions.

4.2              All references in this chapter to “regulators” are to the ACCC (in relation to the ACL) or to ASIC (in relation to the ASIC Act) unless otherwise stated.

Context of amendments

Unfair contract terms

4.3              Standard form contracts are a commonly used and cost-effective option when conducting business, as they avoid the transaction costs associated with negotiated contracts.

4.4              However, consumers and small businesses often lack the resources and bargaining power to effectively review and negotiate terms in standard form contracts. The existing unfair contract terms protections in the ACL and the ASIC Act provide that where a court finds a term is unfair, the term is void. This approach has not provided sufficient deterrence against the use of unfair terms, which remain prevalent in standard form contracts.

4.5              The existing unfair contract terms protections were first introduced in July 2010 into the Trade Practices Act 1974 and were subsequently adopted into the ACL. Under the regime, a term in a standard form contract is unfair if it:

·                     causes a significant imbalance in the parties’ rights and obligations;

·                     is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by such a term; and

·                     would cause detriment (financial or otherwise) to a party if the term were to be applied or relied on.

4.6              In determining whether a contract term falls within this definition, a court can consider such matters as it thinks relevant but must take into account the contract as a whole and the extent to which a term is transparent.

4.7              The ACL provisions address unfair contract terms in contracts for goods, services and the sale or grant of an interest in land. The equivalent ASIC Act provisions address unfair contract terms in contracts for financial products and services.

4.8              In November 2016, the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 extended the unfair contract terms protections to standard form small business contracts that meet certain criteria. The extension of the protections to small business recognised that small businesses can often face the same challenges as consumers in a contractual relationship.

4.9              The regime was further extended by the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Act 2019, Schedule 1 to which commenced on 5 April 2021. This extended the unfair contract terms protections under the ASIC Act to insurance contracts. This addressed Recommendation 4.7 – banning unfair contract terms in standard insurance contracts – of the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Reviews of the unfair contract terms regime

4.10          On 21 November 2018, the Government released the Review of Unfair Contract Term Protections for Small Business: Discussion Paper (2018 review). Information gathered through the 2018 review suggested that while the unfair contract terms regime had improved protections for small business in certain industry sectors, it did not provide strong deterrence against businesses using unfair contract terms in their standard form contracts.

4.11          Additionally, the 2018 review found that some aspects of the current regime appeared to have created ambiguity, uncertainty and practical difficulties for businesses to comply with the law. Submissions to the 2018 review also highlighted the need for regulators to promote awareness of the unfair contract terms protections and assist with compliance with the law by improving the guidance they provide to businesses.

4.12          Having considered the findings from the 2018 review, the Government announced in March 2019 its intention to strengthen the unfair contract terms protections. Treasury subsequently released a Consultation Regulation Impact Statement in December 2019, with consultation concluding in March 2020. In the consultation, almost 80 submissions were received, and a series of stakeholder roundtables were also held.

4.13          In November 2020, at the meeting of the Legislative and Governance Forum on Consumer Affairs, ministers considered a Decision Regulation Impact Statement and agreed that reforms were necessary to better protect consumers and small businesses from unfair contract terms.

4.14          An exposure draft Bill was subsequently released for public consultation in August 2021.

Summary of new law

4.15          This Schedule strengthens the remedies and enforcement of the regime by:

·                     prohibiting the proposal of, use of, application of, or reliance on, unfair contract terms in a standard form consumer or small business contract;

·                     creating new civil penalty provisions for breaches of the prohibitions;

·                     clarifying the powers of a court to make orders to void, vary or refuse to enforce part or all of a contract (or collateral arrangement);

·                     making clear a court’s power to make orders that apply to any existing consumer or small business standard form contract (whether or not that contract is put before the court) that contains an unfair contract term that is the same or substantially similar to a term the court has declared to be an unfair contract term; and

·                     making clear a court’s power to issue injunctions against a respondent with respect to existing or future consumer or small business standard form contracts entered into by a respondent, containing a term that is the same or is substantially the same as a term the court has declared to be an unfair contract term.

4.16          This Schedule expands the class of contracts that are covered by the unfair contract terms provisions by:

·                     increasing the small business definition thresholds (so that the regime captures an expanded class of small business standard form contracts); and

·                     removing the contract value threshold for contracts under the ACL and raising the value threshold for contracts regulated by the ASIC Act (so that the regime captures an expanded class of small business standard form contracts).

4.17          This Schedule clarifies and strengthens the unfair contract terms provisions generally by:

·                     ensuring that repeat usage of a contract must be taken into account by a court when determining whether a contract is a standard form contract;

·                     clarifying that a contract may still be a standard form contract despite there being an opportunity for:

        a party to negotiate changes that are minor or insubstantial in effect;

        a party to select a term from a range of options determined by another party;

        a party to another contract or proposed contract to negotiate terms of the other contract or proposed contract.

·                     making technical amendments to make clear that remedies for non‑party consumers are also applicable to non‑party small businesses;

·                     exempting certain clauses from the unfair contract terms provisions where those clauses are included in standard form contracts in compliance with relevant Commonwealth, state or territory legislation;

·                     excluding certain categories of contracts from the unfair contract terms provisions, including:

        the operating rules of licensed financial markets;

        the operating rules of licensed clearing and settlement facilities; and

        real time gross settlement systems approved as payment and settlement systems by the RBA; and

·                     exempting certain life insurance contracts from the scope of the unfair contract terms provisions.

4.18          This Schedule also requires that the relevant Commonwealth Minister cause a review of the amendments to the ACL, CCA and ASIC Act made by this Schedule to be completed within 6 months after the end of two years from commencement.

4.19          This Schedule does not alter the existing definition of an unfair term.

Comparison of key features of new law and current law

Table 4.1 Comparison of new law and current law

New law

Current law

Under the ACL, the unfair contract terms protections will apply to a small business contract if one party to the contract is a business that employs fewer than 100 persons or has a turnover for the last income year of less than $10,000,000.

Under the ASIC Act, the protections will apply to a small business contract if the upfront price payable does not exceed $5,000,000, and one party to the contract employs fewer than 100 persons or has a turnover for the last income year of less than $10,000,000.

Under both the ACL and ASIC Act part time employees are to be counted as an appropriate fraction of a full‑time equivalent employee.

The unfair contract terms protections apply to a small business contract if one party to the contract is a business that employs fewer than 20 persons and the upfront price payable under the contract does not exceed one of the two alternative monetary thresholds provided for in the law.

A pecuniary penalty may be imposed if a person proposes, applies, relies or purports to apply or rely on, an unfair contract term.

No equivalent.

The court can make orders for a whole contract or collateral arrangement, including to void, vary or refuse to enforce the contract, if this is appropriate to prevent loss or damage that is likely to be caused. The new provisions do not require a court to consider that they will redress actual loss or damage.

The court can also make orders, on the application of the regulator, preventing a term that is the same or substantially similar in effect to a term that has been declared as unfair, from being included in any future standard form small business or consumer contracts.

Additionally, the court can make orders, on the application of the regulator, to prevent or reduce loss or damage which is likely to be caused to any person by a term that is the same or substantially the same in effect to a term that has been declared unfair.

Where a court determines a term in a standard form contract to be unfair, it is automatically void.

The court can also make orders for the whole or any part of a contract or collateral arrangement between the respondent and another person, including that the contract is void. These orders can made by an affected party or by application of the regulator on behalf of either a party or a non‑party. Such orders can only be made when a person or class of persons has suffered, or is likely to suffer, loss or damage.

In addition to the current injunction powers, the court can make an injunction restraining a person from:

             entering into any future contract that contains a term that is the same or similar in effect to a term that has been declared an unfair contract term; or

             applying, or relying on, a term in any existing contract that is the same or similar in effect to a term that has been declared unfair, whether or not that contract is before the court.

Among other powers, the court can make an injunction in such terms as it considers appropriate restraining a party from applying, relying on, or purporting to apply or rely on, a term of a contract that has been declared an unfair term.

In addition to the current matters, a court must also take into account whether one of the parties has used the same or a similar contract before.

 

In determining whether a contract is a standard form contract, a court must take into account a number of matters.

A contract may be determined to be a standard form contract despite there being an opportunity for:

·           a party to negotiate changes to contract terms that are minor or insubstantial in effect;

·           a party to select a term from a range of options determined by another party; or

·           a party to another contract or proposed contract to negotiate terms of the other contract or proposed contract.

In determining whether a contract is a standard form contract, a court must take into account a number of matters, including whether one party was required to reject or accept the terms of a contract in the form in which they were presented and whether another party was given an effective opportunity to negotiate the terms of the contract.

In addition to the current exemptions to the unfair contract terms provisions, contractual provisions that are taken to be included in a contract by operation of a Commonwealth, state or territory law are also excluded to the extent that the relevant law mandates their inclusion.

Additionally, a clause of a contract that results in other contract terms being included in a contract because of the operation of another law of the Commonwealth or a state or territory, is exempt from the unfair contract terms provisions insofar as the provisions would prevent the other terms from being included or operating as required by the law.

Contractual provisions that are required or expressly permitted by a law of the Commonwealth, or of a state or territory, are exempt from the unfair contract terms regime.

The law refers to “non-party” to clarify that the law applies to both consumers and small businesses.

The law refers to “non-party consumers” (despite applying to both consumers and small businesses).

Certain categories of contracts are excluded from the operation of the unfair contract terms provisions. These include:

·           the operating rules of licensed financial markets such as ASX Limited;

·           the operating rules of licensed clearing and settlement facilities; and

·           real time gross settlement systems approved as payment and settlement systems by the RBA.

Certain life insurance contracts are also excluded from the scope of the provisions in order to ensure positive consumer outcomes.

No equivalent.

Detailed explanation of new law

Prohibiting the use, application of or reliance on an unfair contract term

4.20          This Schedule amends both the ACL and the ASIC Act to prohibit the inclusion of or reliance on an unfair contract term in standard form contracts. If a court finds that a person has contravened the new prohibitions, it can order a pecuniary penalty.
[Schedule 4, items 1 to 4, subsections 23(2A) to (2C) of the ACL and subsections 12BF(2A) to (2C), 12BG(1) and 12BH(1) of the ASIC Act]

4.21          A person will be in breach of the law if they propose an unfair term in a standard form consumer or small business contract which they have entered into.
[Schedule 4, items 1 to 4, subsections 23(2A) to (2B) of the ACL and subsections 12BF(2A) to (2C), 12BG(1) and 12BH(1) of the ASIC Act]

4.22             Each individual unfair term contained in a contract proposed by the person is considered a separate contravention and, as a result, a person can be found to have multiple contraventions in a single contract. While this could result in a high theoretical maximum penalty, a court will apply existing principles regarding the assessment of the pecuniary penalty to be imposed, to ensure that the total quantum of penalties is appropriate. Accordingly, these provisions are consistent with the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers.
[Schedule 4, items 1 and 2, subsection 23(2B) of the ACL and subsection 12BF(2B) of the ASIC Act]

4.23          The term ‘makes a contract’ in this Schedule includes where a person enters into a contract. It is not intended to apply where a person merely drafts or creates a new standard form contract template for later use.

4.24          A person will also be in breach of the law if they apply or rely on (or purport to apply or rely on) an unfair term of a standard form consumer or small business contract.
[Schedule 4, items 1 and 2, subsection 23(2C) of the ACL and subsection 12BF(2C) of the ASIC Act]

4.25          To apply or rely on (or purport to apply or rely on) means to give effect to or seek to enforce an unfair term of a contract. As such, a person can have multiple contraventions in relation to the same contract or unfair term of a contract if they apply or rely on multiple unfair terms or an unfair term or terms on multiple occasions.

4.26          This Schedule extends the existing powers of a court to order a pecuniary penalty in relation to breaches of the prohibitions, in addition to making a declaration that a term is unfair.
[Schedule 4, items 11 to 13, 27 and 28, subparagraph 224(1)(a)(iia) and subsections 224(3) and 224(3A) of the ACL and subsection 12BA(1) (definition of enforcement proceeding) and paragraph 12GBA(6)(aa) of the ASIC Act]

4.27             The Government’s expectation is that regulators will continue to take a reasonable and proportionate approach to enforcing the unfair contract terms provisions, including affording businesses an opportunity to respond to allegations of unfair terms before commencing any legal proceedings.

Remedies available under the unfair contract terms regime

4.28          This Schedule clarifies a court’s power to determine an appropriate remedy when it finds a term is unfair, introduces new penalty provisions, and makes some changes to improve the consistency of remedies available under the ACL and ASIC Act.
[Schedule 4, items 5 to 40, sections 137D, 137F(2)(b), (c) and (d), 137H(1)(b), 157(1AA)(b), 237(1)(a) and (b), 2(1) (definitions of declared term and enforcement proceeding), 224(1)(a)(ii), 224(3), 224(3A), 232(3), 237(1)(a) and (b), 237(3), 238(1), 242, 243A, 243B, 244, 245, 247(1)(a), 248(1)(a)(i) of the ACL and sections 12BA(1), 12GBA(6)(a), 12GD(9), 12GF(1), 12GG, 12HB(1)(b), 12GLA(4), 12GLC(1)(a), 12GLD(1)(a), 12GM(10), 12GN(1)(c), 12GN(9), 12GNB(1(a)(i), 12GND, 12GNE, 12GNF and 12GNG of the ASIC Act]

4.29          Under the existing law, where the court determines a term in a standard form contract to be unfair, the term is automatically void.

4.30            A court can also make orders in relation to the whole or any part of a contract or collateral arrangement made between a respondent and another person, including that the contract or arrangement is void, varied, or is not able to be enforced. These orders can be made in relation to a person who is a party to a proceeding before a court (or on whose behalf the regulator has brought a matter before a court) or in relation to non‑party persons.

4.31            Importantly, all these orders can only be made where a person (or class of persons) has suffered, or is likely to suffer, loss or damage because of the conduct of another person.

4.32            The above remedies are available under the general powers in the ACL and the ASIC Act (particularly subsections 237(1), 238(1), 239(1) and section 243 of the ACL and sections 12GN, 12GNB, 12GNC of the ASIC Act).

4.33            This Schedule augments these powers by making additional remedies available that specifically relate to unfair contract terms and are not available for other contraventions of the ACL and the ASIC Act.
[Schedule 4, items 5, 24 and 40, section 137D, sections 243A and 243B of the ACL and sections 12GNE and 12GNF of the ASIC Act]

4.34            This Schedule retains the automatic voiding present in the existing law. The court can also make orders to void, vary or refuse to enforce part or all of a contract if the court thinks this is appropriate to prevent or reduce loss or damage that may be caused (or to remedy loss or damage that has occurred).

4.35            This differs to the orders the court can make under sections 237 and 238 of the ACL and section 12GM of the ASIC Act. Under those provisions, the court must be satisfied that loss or damage has occurred or is likely to occur. Under this Schedule, a person will only need to show that the orders will prevent loss and damage that may be caused. If loss and damage has already been suffered, then the court will need to be satisfied that the orders made will remedy this.

4.36            The amendments also allow the court to make orders, on the application of the regulator, preventing a term that is the same or substantially similar in effect to a term that has been declared as unfair, from being included in any future standard form small business or consumer contracts by a person who is the respondent to the proceeding where the declaration about an unfair contract term was made.
[Schedule 4, items 24 and 40, paragraph 243B(1)(a) of the ACL and paragraph 12GNF(1)(a) of the ASIC Act]

4.37            In addition, the amendments allow the court to make orders, on the application of the regulator, to prevent or reduce loss or damage which may be caused to any person (whether or not that person is party to proceedings for which the court is making the order) in relation to a term that is the same or substantially the same in effect to a term that has been declared unfair. These orders can be made in relation to any existing contract, whether or not that contract is subject to the proceedings for which the court is making the order. [Schedule 4, items 24 and 40, paragraph 243B(1)(b) of the ACL and section 12GNF of the ASIC Act]

4.38            This Schedule makes clear that orders can be made under the current subsections 237(1) and 239(1) of the ACL or of subsections 12GNE(1) and 12GNF(1) of the ASIC Act, and the new remedy provisions, which extend to unfair contract terms in standard form contracts that are not specifically before the court. This Schedule retains the current ability of the court to make certain orders under the ACL or ASIC Act regardless of whether an injunction or other order under the provisions specified, has been made.
[Schedule 4, items 14, 24 and 40, sections 232(3), 243A, 243B and 245 of the ACL and sections 12GNE, 12GNF and 12GNG of the ASIC Act]

4.39            An application for these orders can be made at any time within six years after the day on which a declaration that a term is an unfair contract term is made.
[Schedule
4, items 18, 24 and 40, subsections 237(3), 243A(3) and 243B(3) of the ACL and subsections 12GNE(3) and 12GNF(3) of the ASIC Act]

4.40            This Schedule augments these powers by making additional remedies available that specifically relate to unfair contract terms.
[Schedule 4, items 5, 24 and 40, sections 137D, 243A and 243B of the ACL and sections 12GNE and 12GNF of the ASIC Act]

4.41            This Schedule will extend the court’s power to make adverse publicity orders and make orders disqualifying a person from managing a corporation. Adverse publicity orders allow a court to make an order, on the application of a regulator, requiring a person to publish information specified by the court. These powers will be extended to breaches of the unfair contract terms provisions in both the ACL and the ASIC Act, where this was not previously available. An adverse publicity order is available by application of the regulator where a pecuniary penalty has been ordered by the court under section 224 of the ACL or section 12GBB of the ASIC Act. This will create consistency between the ACL and the ASIC Act to allow regulators to take steps to further protect the public.
[Schedule 4, items 25, 26, 28, 33 and 35, paragraph 247(1)(a) and subparagraph 248(1)(a)(ia) of the ACL and paragraphs 12GBA(6)(aa), 12GLA(4)(aa) and 12GLD(1)(a) of the ASIC Act]

4.42            This Schedule also extends ASIC’s power under the ASIC Act to issue a public warning notice, warning the public about the conduct of a business, where ASIC has reasonable grounds to suspect that the business has breached the unfair contract terms provisions, ASIC is satisfied that a person has or is likely to suffer detriment because of the breach, and ASIC is also satisfied it is in the public interest to issue such a notice. This is consistent with the existing power in section 223 of the ACL which allows the ACCC to issue the same notice on the same grounds for certain breaches of the ACL. Regulators need not rely on a court order that a term is an unfair contract term in order to meet the ‘reasonable grounds’ requirement in paragraph 12GLC(1)(a) of the ASIC Act and paragraph 223(1)(a) of the ACL. This will create consistency between the ACL and the ASIC Act and with other regulated behaviour provisions in the ASIC Act.
[Schedule 4, item 34, paragraph 12GLC(1)(a) of the ASIC Act]

4.43            Where a consumer or small business has suffered additional loss or damage in excess of that already redressed by the court in a related unfair contract terms proceeding taken by a regulator, they will retain their legal rights and remedies in relation to that loss or damage. These rights to legal recourse are only limited to the extent that the loss or damage has already been redressed or alleviated by a court order and the consumer or small business has accepted the redress or alleviation.

4.44            Consumers remain able to seek alternative compensation through existing mechanisms such as Australian Financial Complaints Authority determinations. This is consistent with existing court practice. This Schedule will not alter the way the Australian Financial Complaints Authority makes determinations but may provide additional considerations in its determinations of fairness.

4.45            Consumers and small businesses will maintain the ability to pursue certain remedies for breaches of the unfair contract terms protections in their state and territory’s Tribunals where the relevant state or territory legislation permits this. This is dependent on state and territory court and tribunal powers, which vary between jurisdictions.

4.46            An application can be made for orders under subsections 243A(1) and 243B(1) of the ACL or under subsection 12GNE(1) or 12GNF(1) of the ASIC Act even if an enforcement proceeding in relation to an unfair contract term has not commenced. This allows an affected party, or a regulator (including on behalf of an affected party), to seek orders under subsection 243A(1) or 243B(1) of the ACL or subsection 12GNE(1) or 12GNF(1) of the ASIC Act in other legal proceedings (for example breach of contract proceedings against the affected party) without the affected party needing to commence civil penalty proceedings under those Acts.  

4.47            Where an enforcement proceeding has commenced, this Schedule includes civil penalty provisions for breaches of the new unfair contract terms prohibitions that can be ordered by a court. The maximum penalties that can be issued under these new provisions can be found in section 224 of the ACL and section 12GBCA of the ASIC Act respectively.
[Schedule 4, items 11 to 14, 27 and 28, subparagraph 224(1)(a)(iia), subsections 224(3), 224(3A) and 232(3) of the ACL and subsection 12BA(1) (definition of enforcement proceeding), and paragraph 12GBA(6)(aa) of the ASIC Act]

4.48            The maximum penalty that can be issued under these provisions in the ACL can be found in section 224 of the ACL and for an individual would be $500,000. For a body corporate, the maximum penalty is the greater of:

·                     $10,000,000;

·                     if the court can determine the value of the benefit that the body corporate, and any body corporate related to the body corporate, have obtained directly or indirectly and that is reasonably attributable to the act or omission, 3 times the value of that benefit; or

·                     if the court cannot determine the value of that benefit—10% of the annual turnover of the body corporate during the 12‑month period ending at the end of the month in which the act or omission occurred or started to occur.

[Schedule 4, items 12 and 13, subsections 224(3) and (3A) of the ACL]

4.49            The maximum penalty that can be issued under these provisions in the ASIC Act can be found in section 12GBCA of the ASIC Act. For an individual the maximum penalty is the greater of:

·                     5,000 penalty units; or

·                     if the court can determine the amount of the benefit derived and detriment avoided because of the contravention, that amount multiplied by 3.

4.50            For a body corporate, the maximum penalty is the greatest of:

·                     50,000 penalty units;

·                     the amount of the benefit derived and detriment avoided because of the contravention multiplied by 3; or

·                     10% of the annual turnover of the body corporate for the 12‑month period ending at the end of the month in which the body corporate contravened, or began to contravene, the civil penalty provision, or if that amount is greater than an amount equal to 2,500,000 penalty units, 2,500,000 penalty units.

[Schedule 4, items 27 and 28, subsection 12BA(1) (definition of enforcement proceeding) and paragraph 12GBA(6)(a) of the ASIC Act]

4.51            While these civil penalties are large, they are the maximum available and are appropriate in size. The Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers outlines that larger penalties are more appropriate for bigger companies, as they provide an adequate deterrent to breaches of the unfair contract terms provisions. Further, under the ASIC Act the courts must consider factors including ‘the nature and extent of the contravention’ and ‘the circumstances in which the contravention took place’ and impose a penalty that is appropriate in the circumstances, including below the maximum penalty. The civil courts are experienced in making civil penalty orders at appropriate levels having regard to the maximum penalty amount, taking into account a range of factors including the nature of the contravening conduct and the size of the organisation involved.

4.52            Therefore, a relevant consideration in setting a civil penalty amount is the maximum penalty that should apply in the most egregious instances of non-compliance with the new unfair contract terms provisions. The maximum civil penalty amounts that can be imposed under these new provisions are intentionally significant and are in line with the penalties for other breaches of the ACL and ASIC Act.

Determining what is a standard form contract

4.53            The unfair contract terms protections only apply to standard form contracts. The law sets out matters that a court must take into account when determining whether a contract is a standard form contract.

Repeat usage of a standard form contract

4.54            This Schedule adds an additional matter that the court must take into account when determining whether a contract is a standard form contract. The court must take into account whether a party has entered into a contract that is the same or substantially similar to another contract entered into by that person and the number of times this has been done. This may include contracts made prior or subsequent to the contract in question. This is a relevant factor because standard form contracts are often used repetitively with the same or similar terms. This does not preclude the first iteration of a contract from being determined to be a standard form contract.
[Schedule 4, items 41 and 43, paragraph 27(2)(ba) of the ACL and paragraph 12BK(2)(ba) of the ASIC Act]

Effective opportunity to negotiate

4.55            Standard form contracts are often provided on a ‘take it or leave it’ basis, with no opportunity for the other party to negotiate any, or the vast majority, of the terms of the contract. In some instances, the party issuing the contract may allow limited changes to be made to the contract that are insubstantial in the context of the whole contract. These circumstances mean the relevant consumer or small business may not have been provided an effective opportunity to negotiate.

4.56            This Schedule clarifies that a court can determine a contract is a standard form contract despite a number of factors. These factors include where a party has negotiated minor or insubstantial changes to the terms of a contract, or has been permitted to select from a pre-determined range of terms within a contract.
[Schedule 4, items 42 and 44, paragraphs 27(3)(a) and (b) of the ACL and paragraphs 12BK(3)(a) and (b) of the ASIC Act]

4.57            Similarly, a court may still determine a contract is a standard form contract even if a party to another contract has been given an opportunity to negotiate the terms of that contract. This clarifies that even if a subset of consumers or small businesses are able to negotiate the terms of a contract that is issued to a broader group of consumers or small businesses, the contract may still be a standard form contract.
[Schedule 4, items 42 and 44, paragraph 27(3)(c) of the ACL and paragraph 12BK(3)(c) of the ASIC Act]

Definition of a small business contract

Upfront price payable threshold

4.58            This Schedule removes the upfront contract value thresholds for the definition of a small business contract in the ACL and raises the threshold to $5,000,000 in the ASIC Act.
[Schedule 4, items 47 and 49, subsections 23(4), (5), (6) and (7) of the ACL and subsections 12BF(4), (5), (6), (7) and (8) of the ASIC Act]

4.59            When the unfair contract terms protections were extended to small business contracts in 2016, a contract value threshold was included to limit the scope of the protections for small business contracts.

4.60            Accordingly, one of the requirements for a contract to be considered a small business contract and covered by the existing unfair contract terms protections is that:

·                     the upfront price payable under the contract does not exceed $300,000; or

·                     if the contract has a duration of more than 12 months, the upfront price payable under the contract does not exceed $1,000,000.

4.61            These upfront contract value thresholds have been eroded due to inflation in the cost of goods and services over time and are now too low to take into account the range of contracts small businesses enter into.

4.62            Additionally, the current upfront contract value threshold amounts do not accommodate small businesses in industries where high value contracts with low profit margins are common as a matter of course.

4.63            Further, where a small business has no ability to negotiate terms and has no effective alternative sources of supply or acquisition, unfair contract terms cannot be avoided even with due diligence.

4.64            This Schedule removes the upfront price payable threshold under the contract as a criterion in determining if the contract is a small business contract under the ACL.
[Schedule 4, item 47, subsections 23(4) and (5) of the ACL.

4.65            This Schedule maintains the contract threshold test for contracts for financial services but raises the cap to $5,000,000. The $5,000,000 threshold is consistent with the Australian Financial Complaints Authority’s exclusion of complaints about small business credit facilities that exceed $5,000,000.
[Schedule 4, item 49, paragraph 12BF(4)(a) of the ASIC Act]

Employee numbers and annual turnover

4.66            In addition to removing the upfront price payable thresholds in the ACL and raising them in the ASIC Act, this Schedule amends the definition of small business contract to expand the class of contracts that will be captured by the unfair contract terms provisions.

4.67            Under the current headcount threshold (which determines whether a business may be considered a ‘small business’ covered by the protections), it can be difficult for a contract-issuing party to determine the other party’s employee numbers. The lack of clarity in the application of the test has led to uncertainty.

4.68            The amended definition requires that one party to a contract is a business that either employs fewer than 100 persons or has an annual turnover of less than $10,000,000 for the previous income year. A party can satisfy one or both of these conditions to fall within the definition.
[Schedule 4, items 45 to 47 and 49 to 52, paragraphs 139G(2)(aa), 139G(2A)(a) and subsection 23(4)(b) of the ACL and paragraphs 12BF(4)(b), 12BH(2)(aa), 12BL(3)(a) and 12GND(2)(a) of the ASIC Act]

4.69            For the purposes of the employee threshold, all employees of the party to the contract must be counted. Employee numbers are intended to be calculated at the time a contract is entered into with a party and later changes in employee numbers will not affect whether the amended small business definition is met.

4.70            A party includes and is not limited to a person, entity or body corporate.

4.71            The amendments also clarify how employees are to be counted in determining whether a business falls within the 100‑employee threshold. This Schedule maintains the existing exclusion for casual employees not employed on a regular and systematic basis, but also introduces a pro rata assessment for staff employed on a part time basis. These threshold requirements more accurately reflect the reality of many small businesses and provide certainty as to which contracts will be covered by the regime.
[Schedule 4, items 45 to 47 and 49 to 51, paragraphs 139G(2)(aa), 139G(2A)(a) and subsection 23(5), of the ACL and paragraphs 12BF(4)(a), subsection 12BF(6) and paragraphs 12BH(2)(aa), 12BL(3)(a) and 12GND(2)(a) of the ASIC Act]

4.72            The turnover condition requires the party’s turnover for the previous income year (within the meaning of the ITAA 1997) to be less than $10,000,000 at or before the time the contract is entered into.
[Schedule 4, items 47 and 49, subparagraph 23(4)(b)(ii) of the ACL and subparagraph 12BF(4)(b)(ii) of the ASIC Act]

4.73            A party’s turnover includes the sum of all supplies made by the party during the period but does not include supplies that are, within the meaning of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act):

·                     input taxed;

·                     not for consideration (and are not taxable under section 72-5 of the GST Act);

·                     not connected with the party’s business; or

·                     not connected with the indirect tax zone.

[Schedule 4, items 47 and 49, subsections 23(6) and (7) of the ACL and subsections 12BF(7) and (8) of the ASIC Act]

Minimum standards provisions

4.74            The current unfair contract terms provisions exempt a term of a standard form consumer or small business contract from being declared an unfair term if it is a term required, or expressly permitted, by a law of the Commonwealth, a state or a territory insofar that the term is required, or expressly permitted, by such a law.

4.75            However, the existing law does not clearly exempt terms that are read into a contract by the operation of a law of the Commonwealth, a state or a territory. In some cases, a law only requires or reads terms into a contract on a contingent basis; that is, it only requires certain contract terms be included in a contract if other types of terms have already been included in that contract. This Schedule clarifies that all of these types of terms are exempt from the unfair contract terms provisions.
[Schedule 4, items 53 and 56, subsection 26(1) of the ACL and subsection 12BI(1) of the ASIC Act.]

4.76            For example, some Commonwealth, state and territory laws require that, if a certain term or terms are included in a contract (term X), terms setting industry-specific requirements must also be included in the contract (terms A, B, C, etc.). In these scenarios, where term X of a contract exists, the relevant law either requires the inclusion of, or deems to include, the terms A, B and C as a result. While terms A, B and C are required by a law of the Commonwealth, a state or territory, and therefore cannot currently be declared unfair, term X is not ‘expressly permitted’ nor ‘required’ in the way envisaged by the current exemptions. This Schedule exempts all these terms from the unfair contract terms provisions.

4.77            As a result, these terms cannot be declared unfair by their mere inclusion alone. However, the unfair contract terms protections can regulate the content of that term where it does not prevent the term from operating as the relevant law requires or envisages. If the term is included in such a way that would go beyond the requirement of the law and is unfair then the unfair contract terms protection can still be applied.

Example 4.1  

Ajay’s Phone Company (Ajay Co.) is seeking to rent a retail property from Sharon’s Building Management Co (Sharon Co.) located inside building A. As part of the lease agreement, Sharon Co. has included a term allowing them to terminate the lease if they want to demolish or renovate the building the relevant retail property is located in.

Under the relevant State law, where a term is included in a contract for a termination of a retail lease on the grounds of the proposed demolition or renovation of the building in which the retail property is located, the lease is taken to include other terms setting out how a person must notify or compensate a tenant as a result of the termination.

The term allowing Sharon Co. to terminate the lease agreement is exempt from the unfair contract terms protections because it results in one or more other terms being included in the contract by operation of a law of a State. The terms about notice and compensation are exempt from the unfair contract terms provisions as they have been included in the contract, or are taken to be so included, because of a law of a State.

4.78            This will ensure that the unfair contract terms regime does not cover terms that other laws require parties to include in their contracts while still ensuring appropriate protections for consumers and small businesses from unfair contract terms. It will also enable state and territory governments to ensure that they are able to implement legislation that reflects the specific requirements of their jurisdiction.

Contracts excluded from the unfair contract terms provisions

4.79            This Schedule excludes a limited number of specific contracts from the operation of the unfair contract terms protections where there are strong public policy reasons for doing so. This includes specific contracts that are integral to the operation of licensed markets, clearing and settlement facilities, and payments systems; and legacy life insurance contracts which, if covered, could result in some consumers being worse off.

Operating Rules of Financial Markets and Clearing and Settlement Facilities

4.80            This Schedule excludes the operating rules (including listing rules) of licensed financial markets and clearing and settlement facilities, such as ASX Limited, from the scope of the unfair contract terms regime. These rules are made and have effect as a contract in accordance with Subdivision B of Division 3 of Part 7.2 and Subdivision B of Division 2 of Part 7.3 of the Corporations Act 2001, respectively. Contracts that consist of, or relate to compliance with, listing rules of the licensed financial market between the operator of the licensed financial market and listed entities, responsible entities for registered schemes and operators of foreign passports funds are also included.
[Schedule 4, items 55 and 58, section 28A of the ACL and section 12BLC of the ASIC Act]

4.81            The exclusion includes contracts made under or in accordance with the operating rules, and extends to written procedures that are incorporated into or made or approved in accordance with, the operating rules.
[Schedule 4, items 55 and 58, section 28A of the ACL and section 12BLC of the ASIC Act]

4.82            Operating rules are contracts that govern the core operational functioning of licensed markets and clearing and settlement facilities as well as the admission standards for listed securities. Operating rules are integral to the operation of Australia’s financial markets and, among other matters, provide for the finality and irrevocability of transactions. Application of the unfair contract terms provisions to these contracts could potentially interfere with, or create uncertainty around, particular terms of operating rules that are necessary to the maintenance of market stability and integrity.

4.83            Operating rules are subject to oversight by ASIC and disallowance by the relevant Minister. Sections 793D and 822D of the Corporations Act 2001 require licensees to lodge amendments to operating rules with ASIC, and the Minister may disallow changes under subsections 793E(3) and 822E(3) of the Corporations Act 2001.

Approved payment or settlement system contracts

4.84            This Schedule excludes contracts that establish, contain, or incorporate rules governing the operation of a payment or settlement system approved under section 9 of the Payment Systems and Netting Act 1998. The exemption includes contracts made in the course of, or for the purposes of, operating such a system.
[Schedule 4, items 54 and 57, subsection 28(5) of the ACL and subsection 12BL(4) of the ASIC Act]

4.85            The systems that are currently approved are the Reserve Bank Information and Transfer System, the Austraclear System and the Clearing House Electronic Sub-register System. These systems are critical to facilitating the orderly settlement of payment obligations in Australia and operate on a largely contractual basis. Application of the unfair contract terms provisions to these arrangements could potentially interfere with, or otherwise create uncertainty around, certain terms such as those which provide for the finality and irrevocability of the settlement of transactions.

4.86            Approved payment or settlement systems are typically subject to robust supervisory oversight. The Reserve Bank Information and Transfer System is owned and operated by the RBA and is subject to the general oversight, decision‑making and audit processes of the Reserve Bank Board and Payments System Board. The Austraclear System and Clearing House Electronic Sub‑register System are each licensed clearing and settlement facilities subject to supervisory oversight from ASIC and the RBA under Part 7.3 of the Corporations Act 2001, including disallowance powers in relation to operating rule changes.

4.87            The scope of this exemption includes the terms on which the RBA transacts in domestic financial markets if, and to the extent that, those terms are set out in the same contractual documents which contain the rules for the Reserve Bank Information and Transfer System as an approved payment or settlement system.

Certain life insurance contracts

4.88            The unfair contract terms provisions as amended by this Schedule do not apply to two categories of life insurance contract.

Guaranteed renewable life insurance policies

4.89            The unfair contract terms provisions as amended by this Schedule do not apply, and are taken never to have applied, to a guaranteed renewable contract that constitutes a life insurance policy within the meaning of the Life Insurance Act 1995, which was made before 5 April 2021, or was entered into before 5 April 2021 and subsequently renewed on or after 5 April 2021. Guaranteed renewable life insurance contracts are contracts whereby the insurer agrees to continue to provide cover on the terms of the original contact so long as the policy holder continues to pay premiums. Many of these contracts are legacy contracts, contracts that have lasted in excess of ten or twenty years and have the same terms as when they were originally entered into.
[Schedule 4, item 58, section 12BLB of the ASIC Act]  

4.90            Since 5 April 2021 when the unfair contract terms protections were extended to insurance contracts in response to the Hayne Royal Commission, it has been unclear as to whether the existing unfair contract terms provisions have applied in relation to certain long-standing life insurance contracts. Guaranteed renewable life insurance contracts were not intended to be covered by the unfair contract terms provisions and the insurance industry has proceeded on this presumption, however this has not been clarified under the existing law. The potential for the unfair contract terms provisions to apply to these guaranteed renewable life insurance contracts creates uncertainty in the life insurance industry for both consumers and business. This may result in contracts being voided as a result of terms entered into many years before and that may have been fair at the time the contract was signed.

4.91            This may result in worse outcomes for the consumer. For example, a consumer who has been paying life insurance premiums for decades may not be insurable on the same terms, or at all, if their health and/or occupational circumstances have deteriorated since they first took out the cover. Therefore, these contracts have been excluded from this Schedule to remove this potential negative impact on consumers.

Life insurance policies

4.92            The unfair contract terms provisions as amended by this Schedule do not apply, and are taken never to have applied, to certain life policies within the meaning of the Life Insurance Act 1995, which have been replaced, linked or unlinked. Specifically, this means a life insurance contract entered into before 5 April 2021 which, subsequent to 5 April 2021, has been replaced for the following reasons:

·                     the replacement policy reinstates the previous policy and is issued at the request of the owner of the previous policy after the previous policy lapses;

·                     the replacement policy is a reissue of the previous policy to correct an administrative error in the previous policy;

·                     the replacement policy is issued, at the request of the owner of the previous policy, for one or more of the following reasons:

o   to change the ownership of the policy;

o   to extend or vary the cover provided under the policy in accordance with a term of the previous policy;

o   to change the terms relating to premiums paid under the policy; or

o   to link or unlink certain existing policies.

[Schedule 4, item 58, section 12BLA of the ASIC Act]

4.93            The exemption for linking and unlinking existing policies is to cover situations in which a policy holder changes the structure of their policy by connecting it with or separating it from another policy. For example, a consumer might convert a standalone TPD policy and a standalone death cover policy to one linked cover policy (covering both TPD and death) to reduce premiums. “Linked” covers are inter-dependent of each other. For example, with linked TPD and death cover, a claim for TPD would reduce the sum insured for a subsequent death claim. By contrast, “unlinking” separates out cover that was previously combined so that the policyholder holds two separate policies where a claim under one policy does not affect the sum insured under the other policy.  This Schedule relies on the common definition of linking and unlinking as used in the insurance industry. The terms bundling and unbundling are used interchangeably with the terms linking and unlinking in the insurance industry and share a common definition.

4.94            The exemption in this Schedule for the correction of administrative errors allows for situations where the material content of the insurance contract is not changed but rather an administrative mistake has occurred in the creation of that contract. This includes situations where a name has been misspelled, a person’s gender has been incorrectly recorded or the wrong policy was opened accidently. The correction of these errors may result in an issuing of a new policy on the same or substantially the same terms as the previous contract just without the error and this would apply the new unfair contract terms to these contracts if not exempted.
[Schedule 4, item 58, subsection 12BLA(2)(b) of the ASIC Act]

4.95            The replacements enumerated in subsections 12BLA(1) and (2) each count as renewals, novation or assignments under the law and would otherwise bring the insurance contracts into scope of the new unfair contract terms provisions.  However, many of these contracts are legacy contracts, whose terms were agreed at the time they were entered into but may be unfair in the current context. The introduction of penalties in this Schedule creates an incentive for insurers to refuse to respond to customer-initiated requests relating to life insurance products, such as where a name has been misspelt on a policy, where a customer takes up an option to add cover on terms set out in the original policy, or where a credit card expiry has resulted in a missed payment for the policy and automatic cancellation to avoid potentially breaching the unfair contract terms provisions.

4.96            To avoid potentially negative outcomes for consumers, this Schedule excludes these contracts from the scope of the unfair contract terms regime.

4.97            Where a replacement policy is issued to extend or vary the cover under the policy, and this involves varying a term of the policy that spells out the existing cover, then the new unfair contract terms regime will apply to the term as varied. However, if the extension or variation is achieved by adding new terms to the contract, only the new terms are affected.
[Schedule 4, item 58, subparagraph 12BLA(2)(c)(ii) of the ASIC Act]

Provisions referring to non-party consumers

4.98            This Schedule makes technical amendments to make it clearer that remedies for a breach of the unfair contract terms provisions are available for both non‑party consumers and non-party small businesses. These changes do not affect the way the law currently functions.

4.99            This Schedule amends the law by replacing the definition of ‘non-party consumer’ with the concept of ‘non-party’. This change makes it clear that the remedies for a breach of the unfair contract terms provisions are available to all non-parties, regardless of whether they are consumers or small businesses.
[Schedule 4, items 59, 60 and 69, subsection 2(1) (definition of non-party) and (defintion of non-party consumer) in the ACL and subsection 12BA(1) (definition of non-party) of the ASIC Act]

4.100        Amendments are made to the ACL to ensure all existing references to non‑party consumers are amended to refer to non-parties.
[Schedule 4, items 61 to 68, Division 4 of Part 5-2 (heading), Subdivision B of Division 4 of Part 5-2 (heading), section 239 (heading), subsection 239(1)(c), subsections 239(3)(a) and (b), section 240 (heading), section 240, section 241 (heading) and section 241 of the ACL]

4.101        Amendments are made to the ASIC Act to ensure all existing references to non‑party consumers are amended to refer to non-parties.
[Schedule 4, items 70 to 75, section 12GNB (heading), sections 12GNB, 12GNB(6), 12GNC (heading) and 12GNC of the ASIC Act]

Review of operation of the provisions

4.102        This Schedule requires that the Commonwealth Minister cause a review to be undertaken of the operation of the new unfair contract terms provisions introduced into the ACL, CCA and ASIC Act. The review must relate to the operation of the provisions during the two years post-commencement.
[Schedule 4, item 80]

4.103        This mandated review will allow the Government to carefully examine the effectiveness of the reforms and any potential changes that should be considered. The review must be completed and a report on the review provided to the Minister within 6 months after the end of the period to which it relates, with a final report required to be tabled in Parliament within 15 days of the relevant Minister receiving a copy.
[Schedule 4, item 80]

Other amendments

4.104     This Schedule makes amendments to the ACL to ensure that references to new provisions are incorporated into relevant sections to give effect to the unfair contract terms regime.
[Schedule 4, items 5 to 10 and 14,  section 137D, paragraphs 137F(2)(b) and (c), paragraph 137H(1)(b) and 157(1AA)(b), subsection 2(1) (definitions of declared term) and (definition of enforcement proceeding), and subsection 232(3) of the ACL]

4.105        This Schedule makes amendments to the ASIC Act to ensure that references to new provisions are incorporated into relevant sections to give effect to the unfair contract terms regime.
[Schedule 4, items 27, 28, 30 to 39, subsection 12BA(1), paragraph 12GBA(6)(a), subsections 12GF(1), subsections 12GG, 12HB(1)(b) and 12GLA(4), paragraph 12GLC(1)(a) and 12GLD(1)(a), subsection 12GM(10), paragraph 12GN(1)(c), subsection 12GN(1)(c) and subparagraph 12GNB(1)(a)(i) of the ASIC Act]

4.106        This Schedule also makes minor amendments to the ACL to update the readability and structure of the Acts that do not affect the way the law currently functions.
[Schedule 4, items 15, 17, 20 to 22, 620 and 77, Subdivision A of Division 4 of Part 5‑2 (heading), subsection 237(1) (notes), Subdivision B of Part 5-2 (heading), subsection 239(1) (notes), Subdivision C of Division 4 of Part 5-2 (heading), Subdivision B of Division 4 of Part 5-2 of Schedule 2 (heading) and subsection 303(2) of the ACL]

Application and transitional provisions

4.107        The unfair contract terms amendments (other than item 58) will apply to new standard form contracts that are made at or after the commencement of Schedule 4 to the Bill. Schedule 4 to the Bill will commence on the day after the end of the period of 12 months beginning on the day the Bill receives Royal Assent. The 12-month delay between Royal Assent and commencement is designed to give businesses time to review and adjust their contracts and practices if required to prepare for the new unfair contract terms provisions.  
[Schedule 4, items 78 and 79, section 304 of the ACL and section 350 of the ASIC Act]

4.108        The amendments in Schedule 4 do not apply to a contract made before the commencement of the Schedule, except as provided for in the relevant sections of the ACL and the ASIC Act.
[Schedule 4, items 78 and 79, subsection 304(2) of the ACL and subsection 350(2) of the ASIC Act]

4.109        If the existing contract is renewed at or after the commencement of Schedule 4, the Schedule applies to the contract as renewed on and from the day on which the renewal takes effect.
[Schedule 4, items 78 and 79, subsection 304(3) of the ACL and subsection 350(3) of the ASIC Act]

4.110        A term of a contract varied after the commencement of Schedule 4 will also be covered by the unfair contract terms regime.  If there has not already been a renewal of the contract, the amendments will apply only to the term or terms that have been varied, on and from the day on which the variation takes effect, and as if the contract as varied had been made on the variation day.
[Schedule 4, items 78 and 79, subsection 304(4) of the ACL and subsection 350(4) of the ASIC Act]

4.111        The amendments of sections 137D and 137F of the CCA made by Schedule 4 apply in relation to a contract to the same extent as the amendments of the ACL made by Schedule 4 apply in relation to the contract.
[Schedule 4, item 76]

4.112        Sections 12BLA and 12BLB have effect despite section 325 as inserted by Schedule 1 to the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Act 2020. However, sections 12BLA and 12BLB do not apply to the extent that their operation would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph of the Constitution).
[Schedule 4, item 79, section 351 of the ASIC Act]

4.113        Section 51(xxxi) of the Constitution provides that the Commonwealth Parliament may only legislate with respect to the acquisition of property by the Commonwealth on just terms. Where Schedule 4 would affect rights and obligations under a contract to the extent that it would result in the acquisition of property on unjust terms contrary to section 51(xxxi) of the Constitution, these contracts are exempted from the application of Schedule 4.
[Schedule 4, item 79, section 350 and subsection 351(2) of the ASIC Act]


Table of Contents:

Outline of chapter 57

Context of amendments. 57

Comparison of key features of new law and current law.. 58

Detailed explanation of new law.. 58

Commencement, application, and transitional provisions. 59

 

 

Outline of chapter

5.1              Schedule 5 to the Bill amends the ITAA 1997 to provide further support for small businesses and primary producers impacted by Cyclone Seroja in April 2021. The Schedule makes grants received in relation to Cyclone Seroja under Category C of the Disaster Recovery Funding Arrangements 2018 non‑assessable and non-exempt income for income tax purposes.

Context of amendments

5.2              Grant payments made to businesses are generally assessable income for income tax purposes. However, certain grant payments related to natural disasters have been made exempt or non-assessable non‑exempt income under Divisions 51, 52 and 59 of the ITAA 1997. These include payments for disaster recovery assistance in relation to the 2020 bushfires, Cyclone Yasi and the 2019 floods.

5.3              In the 2021-2022 MYEFO, the Government committed to making certain grants related to Cyclone Seroja non-assessable and non-exempt income for income tax purposes. This effectively increases the value of these grants for small businesses and primary producers recovering from the impacts of Cyclone Seroja.

Comparison of key features of new law and current law

Table 5.1 Comparison of new law and current law

New law

Current law

Grants provided under Category C of the Disaster Recovery Funding Arrangements 2018 to small businesses, and primary producers with a farm enterprise of any size, that were affected by Cyclone Seroja are non-assessable and non-exempt income for income tax purposes, meaning that they are not subject to income tax.

Grants provided under Category C of the Disaster Recovery Funding Arrangements 2018 to small businesses, and primary producers with a farm enterprise of any size, that were affected by Cyclone Seroja are assessable as income for income tax purposes.

Detailed explanation of new law

5.4              Schedule 5 to the Bill amends the ITAA 1997 to provide that a payment is not assessable income or exempt income for income tax purposes if:

·                     for the purposes of the Disaster Recovery Funding Arrangements 2018, the payment is a recovery grant paid to a small business or primary producer as part of a Category C measure; and

·                     it relates to Cyclone Seroja.

[Schedule 5, item 2, section 59-105 of the ITAA 1997]

5.5              Schedule 5 to the Bill does not change the tax treatment for other assistance payments related to Cyclone Seroja, such as the payment of a Disaster Recovery Allowance within the meaning of the Social Security Act 1991. It does not change the tax treatment of any payments made to individuals, households, not-for-profits, or other entities that do not meet the definition of a small business or primary producer as defined in the Disaster Recovery Funding Arrangements 2018.

[Schedule 5, item 2, section 59-105 of the ITAA 1997]

5.6              Cyclone Seroja impacted Australia in April 2021 and is sometimes referred to as Tropical Cyclone Seroja or Severe Tropical Cyclone Seroja.

[Schedule 5, item 2, section 59-105 of the ITAA 1997]

5.7              Schedule 5 to the Bill also updates the index in section 11-55 of the ITAA 1997 to refer to relevant Cyclone Seroja recovery grants as a type of non-assessable non-exempt income.

[Schedule 5, item 1, section 11-55 of the ITAA 1997]

Commencement, application, and transitional provisions

5.8              The amendments made by this Schedule apply to assessments for the 2021‑2022 income year and later income years. No relevant grants were paid in the 2020-2021 income year. Under the relevant grant guidelines, applications for claims close on 31 March 2023 and clean up and recovery activities after 30 June 2023 are not eligible for reimbursement.

 

 


Table of Contents: 

Outline of chapter 61

Context of amendments. 61

Comparison of key features of new law and current law.. 63

Detailed explanation of new law.. 64

Consequential amendments. 71

Commencement, application, and transitional provisions. 72

 

 

Outline of chapter

6.1              Schedule 6 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 make amendments to reduce the effective tax rate on certain income earned by foreign resident workers participating in the Australian Agriculture Worker Program or the Pacific Australia Labour Mobility scheme from 32.5 per cent to 15 per cent.

6.2              This ensures that such workers pay tax at an appropriate rate on program income, consistent with similar migration programs.

Context of amendments

Recent visa and program developments

6.3              Foreign resident workers are an essential source for helping to meet labour shortages in rural and regional Australia, particularly in the agriculture, meat processing, hospitality and tourism sectors. Currently, the Seasonal Labour Mobility Program (otherwise known as the Seasonal Worker Programme) and Pacific Labour Scheme help to meet these workforce shortages.

6.4              On 23 August 2021, the Government announced the establishment of the Australian Agriculture Worker Program (otherwise known as the Australian Agriculture Visa Program). The Migration Amendment (Australian Agriculture Workers) Regulations 2021 introduced the Australian Agriculture Worker stream into the Subclass 403 (Temporary Work (International Relations)) visa. The visa is available to lower skilled and skilled workers across agricultural industries such as the meat processing, fishery and forestry sectors. This will complement the broader suite of temporary migration products already available to industry.

6.5              On 23 November 2021, the Government announced that the Seasonal Labour Mobility Program and the Pacific Labour Scheme would be consolidated into a single, streamlined Pacific Australia Labour Mobility scheme. Under the new Pacific Australia Labour Mobility scheme, eligible businesses can recruit workers for seasonal jobs for up to 9 months or longer-term roles for up to 4 years to help fill unskilled, low and semi-skilled workforce shortages in any sector, including the agriculture, meat processing, hospitality and tourism sectors, mostly in rural and regional areas. The Pacific Australia Labour Mobility scheme is set to commence on 4 April 2022 and will be administered by the Department of Foreign Affairs and Trade.

Income tax rates applying to foreign resident workers

6.6              Individuals who are not residents of Australia for tax purposes (known as ‘foreign residents’ or ‘non-residents’) are taxed at 32.5 per cent from their first dollar of income. Such tax treatment may discourage participation in the Australian Agriculture Worker Program and Pacific Australia Labour Mobility scheme, as workers under these programs would typically be lower income earners.

6.7              The amendments in this Schedule are important in ensuring the success of the Australian Agriculture Worker Program and Pacific Australia Labour Mobility scheme. The amendments seek to increase Australia’s attractiveness as a destination of choice for foreign resident workers, whilst ensuring that workers of all skill levels pay tax at an appropriate rate on their earnings in Australia.

Comparison of key features of new law and current law

Table 6.1 Comparison of new law and current law

New law

Current law

Tax arrangements for foreign resident workers participating in the Australian Agriculture Worker Program

From the 2022-23 income year, foreign resident workers participating in the Australian Agriculture Worker Program are eligible for a tax offset that will ensure that a 15 per cent tax rate effectively applies to the first $45,000 of program income, less related deductions.

For such income above $45,000 and for any income earned outside of the Australian Agriculture Worker Program, ordinary foreign resident tax rates apply.

Transitional arrangements will apply for the remainder of the 2021‑22 income year. Under the transitional arrangements, a final withholding tax of 15 per cent applies to each dollar of income derived by foreign resident workers under the program.

Generally, foreign residents are subject to the ordinary tax rates applying for foreign residents. For the 2021-22, 2022-23 and 2023-24 income years, the lowest marginal tax rate of 32.5 per cent applies from the first dollar of income earned up to $120,000.  From the 2024‑25 income year onwards, the lowest marginal tax rate of 30 per cent applies from the first dollar of income earned up to $200,000. 

Tax arrangements for foreign residents participating in the Pacific Australia Labour Mobility scheme

From the 2021-22 income year, a final withholding tax of 15 per cent applies to each dollar of income derived by foreign resident workers under the Pacific Australia Labour Mobility scheme.

Generally, foreign residents are subject to the ordinary tax rates applying for foreign residents. For the 2021-22, 2022-23 and 2023-24 income years, the lowest marginal tax rate of 32.5 per cent applies from the first dollar of income earned up to $120,000. From the 2024-25 income year onwards, the lowest marginal tax rate of 30 per cent applies from the first dollar of income earned up to $200,000.

 

However, a final withholding tax of 15 per cent applies to each dollar of income derived by foreign resident workers under the Seasonal Labour Mobility program.

Detailed explanation of new law

Tax arrangements for Australian Agriculture Worker Program

6.8              For the 2022-23 income year and later income years, generally, foreign resident workers participating in the new Australian Agriculture Worker Program will pay no more than 15 per cent tax on the first $45,000 of income earned under the program (less any related tax deductions for that income year). For the arrangements that apply for the remainder of the 2021‑22 income year, see transitional tax arrangements below.
[Schedule 6, item 40, section 842-300 of the ITAA 1997]

6.9              This tax treatment applies for an individual who is a foreign resident at all times during the income year. This ensures that participating workers who would be subject to foreign resident or ‘non-resident’ taxpayer rates of tax under the Income Tax Rates Act 1986 are not effectively taxed at 32.5 per cent from their first dollar of program income.
[Schedule 6, item 40, paragraph 842-300(1)(c) of the ITAA 1997]

6.10          The ordinary foreign resident progressive rates of tax still apply for income exceeding the $45,000 threshold, as well as for income from sources other than the program. As the Australian Agriculture Worker Program is open to skilled workers, it is appropriate that progressive rates of tax begin to apply as an individual earns more income. Setting the threshold at $45,000 ensures that foreign residents participating in the Australian Agricultural Worker Program do not receive more favourable taxation treatment than resident Australian taxpayers.  

6.11          These outcomes are achieved by introducing a tax offset which reduces the amount of income tax payable by the amount necessary to ensure that the rate of income tax on ‘net program income’ for the income year does not exceed 15 per cent.

Net program income

6.12          ‘Net program income’ for the income year is program income derived when holding a relevant visa less related deductions for the year, up to a maximum of $45,000.
[Schedule 6, item 40, subsection 842-300(2) of the ITAA 1997]

6.13          Program income for the income year is the salary, wages, commission, bonuses or allowances paid to the individual as an employee of an Approved Employer under the Australian Agriculture Worker Program. In order to be entitled to a tax offset for program income, it must be derived at a time in the income year when the individual held a Temporary Work (International Relations) Visa (subclass 403).
[Schedule 6, item 40, paragraphs 842-300(1)(a) and (b) of the ITAA 1997]

6.14          Related deductions for the income year are so much of an amount the individual can deduct for the income year as relates to income derived from salary, wages, commission, bonuses or allowances paid to the individual as an employee of an Approved Employer under the Australian Agriculture Worker Program.
[Schedule 6, item 40, paragraphs 842-300(1)(a) and 842-300(2)(b) of the ITAA 1997]

Calculating the value of the tax offset

6.15          The value of the tax offset is the amount which ensures that the effective rate of income tax on net program income does not exceed 15 per cent. In other words, the value is that which ensures that the rate of income tax on program income less deductions, up to the first $45,000, does not exceed 15 per cent.

6.16          The value of the offset is intended to be determined by reference to the difference between the lowest marginal tax rate applying to the foreign resident worker’s income (which is 32.5 per cent in the 2022-23 income year) and the intended 15 per cent effective tax rate for net program income. This remains the case even where the individual may have overall income that exceeds the threshold at which the 32.5 per cent rate no longer applies (which is $120,000 in the 2022-23 income year).  This ensures workers do not face higher rates of tax at lower income levels when they travel to Australia to undertake work as part of the Australian Agricultural Worker Program.  

Example 6.1 Value of the tax offset, where program income less related deductions exceeds $120,000

In the 2022-23 income year, Stephanie derived a salary of $150,000 from her employer under the Australian Agricultural Worker Program and held a relevant visa at the time the income was derived. Stephanie had related deductions of $5,000 for the income year. Therefore, Stephanie’s program income less related deductions is $145,000 (calculated as $150,000 - $5,000). As this amount exceeds $45,000, her net program income is $45,000. Stephanie is a foreign resident at all times in the income year.

Stephanie is eligible for a tax offset that ensures that the rate of income tax on her net program income is 15 per cent.

The value of the tax offset is the difference between the amount of tax payable if the $45,000 were subject to tax at 32.5 per cent (being the tax rate applying to income in the first income bracket for foreign resident taxpayers) and the amount of tax payable if the $45,000 were subject to tax at 15 per cent. This is equal to $7,875 (calculated as (0.325 - 0.15) × $45,000).

For the 2022-23 income year, Stephanie’s total tax payable is equal to her taxable income multiplied by the applicable marginal tax rate, minus the value of any tax offsets. That is, $40,375 (calculated as ($120,000 × 0.325) + ($25,000 × 0.37) - $7,875).

Example 6.2 Value of the tax offset, where program income less related deductions is below $45,000

In the 2022-23 income year, Simon derived a salary of $48,000 from his employer under the Australian Agricultural Worker Program and held a relevant visa at the time the income was derived. Simon had related deductions of $5,000 for the income year. Therefore, Simon’s program income less related deductions is $43,000 (calculated as $48,000 - $5,000). Simon’s net program income is $43,000. Simon is a foreign resident at all times in the income year.

Simon is eligible for a tax offset of $7,525 that ensures the rate of income tax on net program income is 15 per cent. This is calculated as $43,000 × (0.325 - 0.15).

Simon also had $1,000 of other Australian sourced income. As this does not relate to amounts paid to him as an employee of an employer under the Australian Agricultural Worker Program, this income does not qualify for the tax offset and is taxed at 32.5 per cent.

For the 2022-23 income year, Simon’s total tax payable is equal to his taxable income multiplied by the applicable marginal tax rate, minus the value of any tax offsets. That is, $6,775 (calculated as (($43,000 + $1,000) × 0.325) - $7,525).

Allowing tax arrangements to be updated by regulations

6.17          These amendments also allow this tax treatment to be extended to foreign resident workers under any programs prescribed by regulations and for regulations to prescribe visa names for these purposes.
[Schedule 6, item 40, paragraphs 842‑300(1)(b) and (3)(b) of the ITAA 1997]

6.18          This will increase flexibility to update the tax law in response to future changes, such as changes to program names or the creation of new programs for foreign residents for which this tax treatment is appropriate. It will also allow flexibility to update the tax law in response to changes to visa names by regulations.

6.19          This will provide the Government with the necessary flexibility to make timely changes to tax arrangements to support the success of Australia’s existing and future labour mobility programs. The regulations would be subject to disallowance and therefore will be subject to appropriate parliamentary scrutiny.

Fringe benefits tax applies  

6.20          From 1 July 2022, benefits provided by an employer to a foreign resident worker participating in the Australian Agriculture Worker Program are subject to FBT.

6.21          This is because under the Fringe Benefits Tax Assessment Act 1986, employers may be liable for tax on fringe benefits provided to an employee and from 1 July 2022, such a foreign resident worker will meet the definition of an employee. For the purposes of the Fringe Benefits Tax Assessment Act 1986, ‘employee’ is defined by reference to receiving or being entitled to receive, salary or wages, where salary or wages is defined by reference to certain listed withholding payments that are assessable income. Under the tax arrangements outlined above, payments made on or after 1 July 2022 to foreign resident workers participating in the Australian Agriculture Worker Program constitute a listed withholding payment that is assessable income.

Withholding arrangements

6.22          The Commissioner of Taxation may make withholding schedules specifying the amount to be withheld from a withholding payment. When making such a schedule, the Commissioner of Taxation is required to have regard to any tax offsets.

6.23          The Commissioner may use this power to ensure employers withhold the correct amounts from payments made to employees under the Australian Agriculture Worker Program throughout the income year.

Superannuation arrangements

6.24          In accordance with the existing law, employers of foreign resident workers under the Australian Agriculture Worker Program are required to make superannuation contributions on behalf of workers.

6.25          When leaving Australia, workers may be eligible to claim this superannuation back as a departing Australia superannuation payment.

Transitional arrangements for remainder of 2021-22 income year

6.26          Transitional tax arrangements apply from 1 March 2022 to 30 June 2022 to ensure that from the inception of the Australian Agriculture Worker Program (and in lieu of the tax offset being implemented), participating foreign resident workers are not taxed at 32.5 per cent from their first dollar of income. The transitional tax arrangements ensure participating workers are taxed at a rate of 15 per cent on all program income derived at a time they hold a relevant visa.

6.27          This is achieved through providing a final withholding tax of 15 per cent. See below for more details about the final 15 per cent withholding tax, which applies for ‘covered labour mobility programs’. The Australian Agriculture Worker Program is only a ‘covered labour mobility program’ until 30 June 2022, when the transition period ends.
[Schedule 6, items 12 and 38, section 840‑906 of the ITAA 1997]

6.28          The final withholding tax of 15 per cent notably also applies to program income above $45,000. However, as the program starts part way through the 2021-22 income year, there are unlikely to be many (or any) workers with income above $45,000 in the income year. For participating workers earning less than $45,000 in the 2021-22 income year, the transitional tax arrangements are likely to result in substantively the same or similar amounts of tax being paid to the outcomes that would occur if the longer-term tax arrangements described above were to have applied.

6.29          Section 52 of the Taxation Administration Regulations 2017 provides that the amount to be withheld from a payment of salary, wages, commission, bonuses or allowances is 15 per cent of each payment. This ensures that Approved Employers withhold the correct amounts from payments to employees throughout the 2021-22 income year.

6.30          During the transitional income year, benefits provided to foreign resident workers are not subject to FBT. This is because such workers are not employees for the purposes of the Fringe Benefits Tax Assessment Act 1986, as payments to such workers are non-assessable during the 2021-22 income year.  

6.31          The usual superannuation arrangements will also apply in the transitional income year, which are explained above.

Tax arrangements for Australian Agriculture Worker Program in transition period and Pacific Australia Labour Mobility scheme from 2021-22

6.32          This Schedule extends the final withholding tax that applies for foreign resident workers under the Seasonal Labour Mobility Program to foreign resident workers under the Pacific Australia Labour Mobility scheme, with effect from 1 March 2022. The same final withholding tax is also extended to foreign resident workers under the Australian Agriculture Worker Program, but only from 1 March 2022 to 30 June 2022 (as mentioned above).

6.33          The final withholding tax is re-named from the ‘Seasonal Labour Mobility Program withholding tax’ to the ‘labour mobility program withholding tax’, to reflect its broader scope.
[Schedule 6, items 19 and 20, section 995-1 of the ITAA 1997]

6.34          In extending the final withholding tax to these new programs, all the same arrangements that apply for the Seasonal Labour Mobility Program are to apply. This includes rules relating to the rate of tax, an employer’s obligation to withhold from payments under the program, liability for the tax and amounts subject to the tax, as well as other administrative arrangements and settings.

Rate of tax

6.35          The final withholding tax is imposed at a rate of 15 per cent on amounts subject to the tax. 
[Schedule 1 to the Income Tax Amendment (Labour Mobility Program) Bill 2022, items 1 and 2, Income Tax (Seasonal Labour Mobility Program Withholding Tax) Act 2012]

Employers required to withhold from payments under the program

6.36          Employers making payments subject to the final withholding tax must withhold from each payment. Section 52 of the Taxation Administration Regulations 2017 provides that the amount to be withheld is 15 per cent of each payment.
[Schedule 6, items 25, section 12‑319A in Schedule 1 to the TAA 1953]

6.37          To encourage compliance, an employer is not entitled to a deduction for payments of salary, wages, commission, bonuses or allowances that they have paid to the extent that they fail to withhold an amount, or after withholding the amount, that they fail to pay to the Commissioner of Taxation. An employer can deduct salary, wages, commission, bonuses or allowances to the extent that the withholding tax has been paid to the Commissioner of Taxation for that income year.
[Schedule 6, items 5 and 6, section 26-25A of the ITAA 1997]

Liability for final withholding tax and discharging the liability

6.38          Employees paid amounts subject to the final withholding tax are liable for the tax.
[Schedule 6, item 10, section 840-905 of the ITAA 1997]

6.39          However, the employee is entitled to a credit equal to the amount of withholding tax withheld by their employer.
[Schedule 6, item 31, section 18‑33 in Schedule 1 to the TAA 1953]

6.40          Other crediting rules may also apply to ensure appropriate outcomes where an employer who has failed to withhold amounts, pays administrative penalties and general interest charge or where the tax has been overpaid.

6.41          Where an employer has withheld more than the 15 per cent withholding tax, the Commissioner of Taxation must refund the overpaid amount to the employee.
[Schedule 6, item 18, section 840-920 of the ITAA 1997]

Amounts subject to final withholding tax

6.42          The final withholding tax applies to salary, wages, commission, bonuses or allowances paid to the individual as an employee of an Approved Employer under the Pacific Australia Labour Mobility scheme derived at a time in the income year when the individual held a Temporary Work (International Relations) Visa (subclass 403) and was a foreign resident.
[Schedule 6, item 10, section 840-905 of the ITAA 1997]

6.43          These amounts are non-assessable non-exempt income, which ensures that the amounts upon which the tax is imposed are not assessable under other tax law provisions that may apply to the individual. The foreign resident worker’s other Australian sourced income remains assessable.
[Schedule 6, item 16, section 840-915 of the ITAA 1997]

Other administrative arrangements and settings

6.44          The final withholding tax is due and payable at the end of 21 days after the end of the income year in which the employee derived the income to which the tax relates. The Commissioner of Taxation must give notice of these details to the taxpayer. Where the tax remains unpaid, liability for general interest charge arises from the date upon which the liability was due to be paid.
[Schedule 6, items 14 and 15, section 840‑910 of the ITAA 1997]

6.45          The Commissioner of Taxation may make a determination of the amount of withholding tax payable. The determination is not an assessment. However, production of the Commissioner of Taxation’s notice of the amount or a certified copy by the Commissioner of Taxation is conclusive evidence that the notice and its particulars has been given, except on review or appeal under Part IVC of the TAA 1953. A person who is dissatisfied with the Commissioner of Taxation’s notice may object to the notice in the manner set out in Part IVC of the TAA 1953.
[Schedule 6, item 15, section 840‑910 of the ITAA 1997]

Fringe benefits tax does not apply

6.46          Under these tax arrangements, benefits provided to foreign resident workers are not subject to FBT. This is because such workers are not employees for the purposes of the Fringe Benefits Tax Assessment Act 1986, as payments to such workers are non-assessable.  

Superannuation arrangements

6.47          In accordance with the existing law, employers of foreign resident workers under these programs are required to make superannuation contributions on behalf of workers.

6.48          When leaving Australia, workers may be eligible to claim this superannuation back as a departing Australia superannuation payment.

Consequential amendments

Amendments relating to the tax offset

6.49          The amendments add the new tax offset relating to the Australian Agriculture Worker Program to the list of tax offsets in Division 13 of the ITAA 1997, which assists readers to navigate the legislation.
[Schedule 6, item 37, section 13-1 of the ITAA 1997]

6.50          The amendments insert a new Subdivision and guidance provision for the tax offset in Division 842 of ITAA 1997, as well as updating the heading to the division to reflect its broader coverage.
[Schedule 6, items 39 and 40, section 842-300, Subdivision 842-L and Division 842 of the ITAA 1997]

Amendments relating to final withholding tax for labour mobility programs

6.51          The amendments update a number of references in various taxation laws from ‘Seasonal Labour Mobility Program withholding tax’ to ‘labour mobility program withholding tax’ and from ‘Seasonal Labour Mobility Program’ to ‘labour mobility programs’. This reflects changes in terminology to allow the scope of programs subject to a final withholding tax of 15 per cent to change over time, in accordance with the tax arrangements described in this Explanatory Memorandum.
[Schedule 6, items 1 to 4, 7 to 9, 11, 13, 17, 21 to 24, 26 to 30, and 32 to 35, section 170(10AA) of the ITAA 1936, sections 11-55, 12‑5, 26-25A, 840-900, 840-905, 840-910, 840-920 and Subdivision 840-S of the ITAA 1997, Subdivision 840-S of the Income Tax (Transitional Provisions) Act 1997, section 8AAB of the TAA 1953, sections 10-5, 15-15, 16-195, 18-10, 18-33, 18-35, 250-10, Subdivision 12-FC and group heading before section 18-30 in Schedule 1 to the TAA 1953]

6.52          The final 15 per cent withholding tax applies to ‘covered labour mobility programs’. From 1 March 2022 to 30 June 2022, ‘covered labour mobility programs’ includes:

·                     the Seasonal Labour Mobility Program;

·                                 the Pacific Australia Labour Mobility scheme; and

·                                 the Australian Agriculture Worker Program.

6.53          From 1 July 2022, ‘covered labour mobility programs’ includes the Seasonal Labour Mobility Program and the Pacific Australia Labour Mobility scheme.

Commencement, application, and transitional provisions

6.54          The amendments providing transitional arrangements for the Australian Agriculture Worker Program for the 2021-22 income year and providing ongoing arrangements for the Pacific Australia Labour Mobility scheme commence on the day after Royal Assent of the Income Tax Amendment (Labour Mobility Program) Act 2022. The Income Tax Amendment (Labour Mobility Program) Bill 2022 imposes and sets the rate of the labour mobility program withholding tax.
[Section 2 of the Bill; section 2 of the Income Tax Amendment (Labour Mobility Program) Bill 2022]

6.55          The amendments inserting the ongoing tax arrangements for the Australian Agriculture Worker Program commence 1 July 2022. [Section 2 of the Bill]

Tax arrangements for Australian Agriculture Worker Program

6.56          The tax offset for foreign resident workers participating in the Australian Agriculture Worker Program applies in relation to salary, wages, commission, bonuses or allowances paid to an employee on or after 1 July 2022. [Schedule 6, item 41]

6.57          Transitional tax arrangements providing a final withholding tax of 15 per cent apply in relation to salary, wages, commission, bonuses or allowances paid to an employee from 1 March 2022 until 30 June 2022.
[Schedule 6, items 36 and 38, section 840‑906 of the ITAA 1997]

6.58          Depending on timing of enactment of the Bill and when visa holders first arrive and begin working in Australia, these amendments may potentially apply in relation to amounts paid prior to commencement. To the extent that the amendments apply retrospectively in this way, the changes are wholly beneficial to or do not disadvantage anyone affected by the amendments.

6.59          The amendments are wholly beneficial for foreign resident workers participating in the program, as such workers would otherwise be taxed at foreign resident rates.

6.60          Retrospectively changing withholding obligations for employers of such workers would also not disadvantage employers, as they would otherwise have been required to withhold at foreign resident rates (32.5 per cent). If an employer withheld at a rate of 32.5 per cent, they would have met the lesser obligation of withholding at 15 per cent.

Tax arrangements for Pacific Australia Labour Mobility scheme

6.61          A final withholding tax of 15 per cent applies for foreign resident workers participating in the Pacific Australia Labour Mobility scheme. This applies in relation to salary, wages, commission, bonuses or allowances paid to an employee on or after 1 March 2022.
[Schedule 6, item 36]

6.62          Depending on timing of enactment of the Bill, these amendments may potentially apply in relation to amounts paid prior to commencement. To the extent that the amendments apply retrospectively in this way, the changes are wholly beneficial to or do not disadvantage anyone affected by the amendments. This is for the same reasons as explained above in relation to the tax arrangements for the Australian Agriculture Worker Program.

 


Table of Contents:

Outline of chapter 75

Context of amendments. 76

Summary of new law.. 76

Detailed explanation of new law.. 76

Parts 1 and 2 - Registries modernisation amendments. 76

Part 3 - Amendments commencing first day of next quarter 84

Part 4 - Other amendments. 85

Part 5 - Amendments of Acts in other portfolios to allow commutation of certain income streams  88

 

 

Outline of chapter

7.1              Schedule 7 to the Bill makes various miscellaneous and technical amendments to the ASIC Act, the Business Names Registration (Fees) Amendment (Registries Modernisation) Act 2020, the Business Names Registration (Transitional and Consequential Provisions) Act 2011, Corporations Act 2001, the Corporations (Fees) Amendment (Registries Modernisation) Act 2020, the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021, the Fringe Benefits Tax Assessment Act 1986, the National Consumer Credit Protection (Fees) Amendment (Registries Modernisation) Act 2020, the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009, the Social Security Act 1991, the Treasury Laws Amendment (2021 Measures No. 1) Act 2021, the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020, and the Veterans’ Entitlements Act 1986. The amendments are part of the Government’s ongoing commitment to the care and maintenance of Treasury portfolio legislation.

7.2              The amendments make minor and technical changes to address unintended outcomes and ensure that the law gives effect to the original policy intent.

Context of amendments

7.3              Minor and technical amendments are periodically made to Treasury legislation to remove anomalies, correct unintended outcomes and generally improve the quality of laws. Making such amendments gives priority to the care and maintenance of Treasury portfolio legislation.

7.4              The process was first supported by a recommendation of the 2008 Tax Design Review Panel, which was appointed to examine how to reduce delays in the enactment of tax legislation and improve the quality of tax law changes. It has since been expanded to all Treasury portfolio legislation.

7.5              Schedule 7 to the Bill also makes consequential amendments to social security and veterans’ affairs portfolio laws that affect Treasury portfolio legislation.

Summary of new law

7.6              The minor and technical amendments address technical deficiencies and legislative uncertainty in various treasury laws by:

·                     addressing unintended outcomes

·                     correcting typographical errors

·                     fixing incorrect legislative references; and

·                     enhancing readability and administrative efficiency.

Detailed explanation of new law

Parts 1 and 2 - Registries modernisation amendments

7.7              The Government is implementing the Modernising Business Registers program which seeks to establish a modern government regulatory regime that is flexible, technology neutral and governance neutral.

7.8              The primary focus of the amendments to various Acts that implement the program is to delay the automatic commencement of those Acts until the systems supporting the program are ready.

Amendments commencing the day after the Bill receives Royal Assent

Amendment to the Business Names Registration (Fees) Amendment (Registries Modernisation) Act 2020

7.9              Schedule 7 to the Bill delays the automatic commencement of Schedule 1 to the Business Names Registration (Fees) Amendment (Registries Modernisation) Act 2020 until 1 July 2024 or an earlier date if specified by Proclamation. This prevents automatic commencement before IT systems supporting the Modernising Business Registers Program are ready.
[Schedule 7, item 1, Section 2 of the Business Names Registration (Fees) Amendment (Registries Modernisation) Act 2020]

7.10          Schedule 7 to the Bill also inserts an application provision into the Business Names Registration (Fees) Amendment (Registries Modernisation) Act 2020 which allows the application day of item 1 of Schedule 1 to the Business Names Registration (Fees) Amendment (Registries Modernisation) Act 2020 to be specified by a notifiable instrument. However, if an instrument specifying an application day is not made, the item applies from 1 July 2024.

7.11          The notifiable instrument may specify a single application day generally or a day in relation to some matter (and possibly other days in relation to other matters). This allows a differentiated application in relation to matters in different tranches of the Modernising Business Registers Program.

7.12          The effect of a differentiated application is that the amendment made by item 1 of Schedule 1 to the Business Names Registration (Fees) Amendment (Registries Modernisation) Act 2020 will apply only in relation to the matters specified in a notifiable instrument after the day specified in the notifiable instrument. The provision amended by this item as in force immediately before the commencement of these amendments will continue to apply until 1 July 2024 in relation to other matters (or until an earlier date if specified in a notifiable instrument). This allows the application of amendments made by this item to align with the roll out of IT systems even if matters affected by the item are in different tranches of the Modernising Business Registers Program.
[Schedule 7, item 9]

7.13          These amendments commence on the day after the Bill receives Royal Assent.

Amendment to the Corporations (Fees) Amendment (Registries Modernisation) Act 2020

7.14          Schedule 7 to the Bill delays the automatic commencement of Schedule 1 to the Corporations (Fees) Amendment (Registries Modernisation) Act 2020 until 1 July 2024 or an earlier date if specified by Proclamation. This prevents automatic commencement before IT systems supporting the Modernising Business Registers Program are ready.
[Schedule 7, item 2, section 2 of the Corporations (Fees) Amendment (Registries Modernisation) Act 2020]

7.15          This amendment commences on the day after the Bill receives Royal Assent.

Amendment to the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021

7.16          Schedule 7 to the Bill amends the commencement of Part 3 of Schedule 1 to the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 to commence on 1 July 2024 or an earlier date if specified by Proclamation. This unlinks the commencement of Part 3 of Schedule 1 to the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 from the commencement of item 1150 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 and prevents potential automatic commencement before IT systems supporting the Modernising Business Registers Program are ready.

7.17          Schedule 7 to the Bill also amends the commencement of Schedule 2 to the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 to commence on a day or days to be fixed by Proclamation, rather than a single day. This allows the more flexible commencement necessary to avoid commencement before IT systems supporting the Modernising Business Registers Program are ready.
[Schedule 7, item 3, section 2 of the Financial Sector Reform (Hayne Royal Commission Response – Better Advice) Act 2021]

7.18          These amendments commence on the day after the Bill receives Royal Assent.

Amendment to the National Consumer Credit Protection (Fees) Amendment (Registries Modernisation) Act 2020

7.19          Schedule 7 to the Bill delays the automatic commencement of Schedule 1 to the National Consumer Credit Protection (Fees) Amendment (Registries Modernisation) Act 2020 until 1 July 2024 or an earlier date if specified by Proclamation. This prevents automatic commencement before IT systems supporting the Modernising Business Registers Program are ready.
[Schedule 7, item 4, section 2 of the National Consumer Credit Protection (Fees) Amendment (Registries Modernisation) Act 2020]

7.20          This amendment commences on the day after the Bill receives Royal Assent.

Amendment to the Treasury Laws Amendment (2021 Measures No. 1) Act 2021

7.21          Schedule 7 to the Bill amends the commencement of Part 4 of Schedule 2 to the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 to be on a day or days to be fixed by Proclamation or on 1 July 2024 if an earlier date is not fixed. This prevents commencement before IT systems supporting the Modernising Business Registers Program are ready.
[Schedule 7, item 5, section 2 of the Treasury Laws Amendment (2021 Measures No. 1) Act 2021]

7.22          This amendment commences on the day after the Bill receives Royal Assent.

Amendment to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020

7.23          Schedule 7 to the Bill amends the commencement of items 1 to 1258 and items 1262 to 1467 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 to be on a day or days to be fixed by Proclamation or on 1 July 2024 if an earlier date is not fixed. This prevents commencement before IT systems supporting the Modernising Business Registers Program are ready.
[Schedule 7, items 6 and 7, section 2 of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020]

7.24          This amendment does not affect the commencement of any items of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 that commenced before the commencement of this amendment.
[Schedule 7, item 8]

7.25          Schedule 7 to the Bill also inserts an application provision into the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 which allows the application days of items of Part 2 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 to be specified by a notifiable instrument. However, if an instrument specifying an application day is not made in relation to any items (or any matters in relation to any items), the items apply from 1 July 2024.

7.26          The notifiable instrument may specify a single application day generally or a day in relation to some matter for an amending item (and possibly other days in relation to other matters). The notifiable instrument may apply to a single item or a class of items described in the instrument. This allows a differentiated application in relation to matters and items. The purpose of this approach is to enable flexibility in the timing and scope of application of the amendments in relation to matters in different tranches of the Modernising Business Registers Program.

7.27          However, this flexibility remains bounded by the scope of the amending items and their eventual automatic application (if not applied earlier). Any notifiable instruments will only specify the dates on which the items necessary to support a particular tranche of the Modernising Business Registers Program will apply in relation to the matters covered by the IT roll out (such as the particular registers being transferred from ASIC to the Registrar in that tranche).

7.28          The effect of a differentiated application is that the amendments made by items of Part 2 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 will apply only in relation to the matters specified in a notifiable instrument after the day specified in the notifiable instrument. The provisions amended by these items as in force immediately before the commencement of these amendments will continue to apply until 1 July 2024 in relation to other matters (or until an earlier date if specified in a notifiable instrument). This allows the application of amendments made by these items to align with the IT roll out even where particular items relate to matters in different tranches of the Modernising Business Registers Program.
[Schedule 7, item 13, items 1465 and 1466 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020]

7.29          Schedule 7 to the Bill also updates the provision that allows both ASIC and the Registrar to complete actions begun by ASIC before the application of the Registries Modernisation amendments. The provision is extended to encompass actions commenced under provisions in Acts modified by the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 that were not specified in the provision as originally drafted.
[Schedule 7, item 13, item 1467 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020]

7.30          These amendments commence on the day after the Bill receives Royal Assent.

Amendments with other commencements

Amendment to the Business Names Registration (Transitional and Consequential Provisions) Act 2011

7.31          Schedule 7 to the Bill amends the application provision in the Business Names Registration (Transitional and Consequential Provisions) Act 2011 to allow the application days of items of Part 2 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 to be specified by a notifiable instrument. However, if an instrument specifying an application day is not made in relation to any items (or any matters in relation to any items), the items apply from 1 July 2024.

7.32          The notifiable instrument may specify a single application day generally or a day in relation to some matter for an amending item (and possibly other days in relation to other matters). The notifiable instrument may apply to a single item or a class of items described in the instrument. This allows a differentiated application in relation to matters and items. The purpose of this approach is to enable flexibility in the timing and scope of application of the amendments in relation to matters in different tranches of the Modernising Business Registers Program.

7.33          However, this flexibility remains bounded by the scope of the amending items and their eventual automatic application (if not applied earlier). Any notifiable instruments will only specify the dates on which the items necessary to support a particular tranche of the Modernising Business Registers Program will apply in relation to the matters covered by the IT roll out (such as the particular registers being transferred from ASIC to the Registrar in that tranche).

7.34          The effect of a differentiated application is that the amendments made by items of Part 2 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 will apply only in relation to the matters specified in a notifiable instrument after the day specified in the notifiable instrument. The provisions amended by these items as in force immediately before the commencement of these amendments will continue to apply until 1 July 2024 in relation to other matters (or until an earlier date if specified in a notifiable instrument). This allows the application of amendments made by these items to align with the IT roll out even where particular items relate to matters in different tranches of the Modernising Business Registers Program.
[Schedule 7, item 10, items 1 and 1A of Schedule 4 to the Business Names Registration (Transitional and Consequential Provisions) Act 2011]

7.35          Schedule 7 to the Bill also makes changes to other items in Schedule 4 of the Business Names Registration (Transitional and Consequential Provisions) Act 2011 which are necessary because of the amendments to the application provision.
[Schedule 7, item 10, items 2 to 4 of Schedule 4 to the Business Names Registration (Transitional and Consequential Provisions) Act 2011]

7.36          These amendments commence immediately after the commencement of item 359 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020.

Amendment to the Corporations Act 2001

7.37          Schedule 7 to the Bill amends an application provision in the Corporations Act 2001 to allow the application days of items of Part 2 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020, items of Part 3 of Schedule 1, or of Schedule 2, to the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021, and items of Part 4 of Schedule 2 to the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 to be specified by a notifiable instrument. However, if an instrument specifying an application day is not made in relation to any items (or any matters in relation to any items), the items apply from 1 July 2024.

7.38          The notifiable instrument may specify a single application day generally or a day in relation to some matter for an amending item (and possibly other days in relation to other matters). The notifiable instrument may apply to a single item or a class of items described in the instrument. This allows a differentiated application in relation to matters and items. The purpose of this approach is to enable flexibility in the timing and scope of application of the amendments in relation to matters in different tranches of the Modernising Business Registers Program.

7.39          However, this flexibility remains bounded by the scope of the amending items and their eventual automatic application (if not applied earlier). Any notifiable instruments will only specify the dates on which the items necessary to support a particular tranche of the Modernising Business Registers Program will apply in relation to the matters covered by the IT roll out (such as the particular registers being transferred from ASIC to the Registrar in that tranche).

7.40          The effect of a differentiated application is that the amendments made by items of Part 2 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020, items of Part 3 of Schedule 1, or of Schedule 2, to the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021, and items of Part 4 of Schedule 2 to the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 will apply only in relation to the matters specified in a notifiable instrument after the day specified in the notifiable instrument. The provisions amended by these items as in force immediately before the commencement of these amendments will continue to apply until 1 July 2024 in relation to other matters (or until an earlier date if specified in a notifiable instrument). This allows the application of amendments made by these items to align with the IT roll out even where particular items relate to matters in different tranches of the Modernising Business Registers Program.
[Schedule 7, item 11, sections 1650 and 1650A of the Corporations Act 2001]

7.41          Schedule 7 to the Bill also makes changes to other sections in Part 10.35 of the Corporations Act 2001 which are necessary because of the amendments to the application provision.
[Schedule 7, item 11, sections 1651 and 1652 of the Corporations Act 2001]

7.42          These amendments commence immediately after the commencement of item 1315 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020.

Amendment to the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009

7.43          Schedule 7 to the Bill amends the application provision in the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 to allow the application days of items of Part 2 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 to be specified by a notifiable instrument. However, if an instrument specifying an application day is not made in relation to any items (or any matters in relation to any items), the items apply from 1 July 2024.

7.44          The notifiable instrument may specify a single application day generally or a day in relation to some matter for an amending item (and possibly other days in relation to other matters). The notifiable instrument may apply to a single item or a class of items described in the instrument. This allows a differentiated application in relation to matters and items. The purpose of this approach is to enable flexibility in the timing and scope of application of the amendments in relation to matters in different tranches of the Modernising Business Registers Program.

7.45          However, this flexibility remains bounded by the scope of the amending items and their eventual automatic application (if not applied earlier). Any notifiable instruments will only specify the dates on which the items necessary to support a particular tranche of the Modernising Business Registers Program will apply in relation to the matters covered by the IT roll out (such as the particular registers being transferred from ASIC to the Registrar in that tranche).

7.46          The effect of a differentiated application is that the amendments made by items of Part 2 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 will apply only in relation to the matters specified in a notifiable instrument after the day specified in the notifiable instrument. The provisions amended by these items as in force immediately before the commencement of these amendments will continue to apply until 1 July 2024 in relation to other matters (or until an earlier date if specified in a notifiable instrument). This allows the application of amendments made by these items to align with the IT roll out even where particular items relate to matters in different tranches of the Modernising Business Registers Program.
[Schedule 7, item 12, items 1 and 1A of Schedule 7 to the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009]

7.47          Schedule 7 to the Bill also makes changes to other items in Schedule 7 of the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 which are necessary because of the amendments to the application provision.
[Schedule 7, item 12, item 2 of Schedule 7 to the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009]

7.48          These amendments commence immediately after the commencement of item 1414 of Schedule 1 to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020.

Part 3 - Amendments commencing first day of next quarter

Amendment to the Fringe Benefits Tax Assessment Act 1986

7.49          In 2013 the Fringe Benefits Tax Assessment Act 1986 was amended by the Tax Laws Amendment (2013 Measures No. 2) Act 2013 to make minor changes to the FBT regime to ensure it operated as intended and to correct anomalies that resulted from introduction of the Australian Charities and Not-for-profits Commission Act 2012.

7.50          The 2013 amendments, which also inserted substantive special conditions contained in Division 50 of the ITAA 1997 modified section 65J to improve readability, using a table format which explicitly cross-referenced the income tax exemption entity provisions. They also included consequential changes to the FBT exemptions for certain tax exempt not-for-profit employers.

7.51          An unintended consequence of the amendments was that income tax exempt not-for-profit private health insurers operating hospitals were inadvertently excluded from accessing the exemption in respect of their hospital employees.

7.52          The legislation fixes this unintended consequence by removing the direct link between the eligibility for the FBT rebate and access to elements of the FBT exemption for hospital employees, restoring access to the exemption to certain tax exempt not-for-profit societies and associations.
[Schedule 7, item 15, section 57A of Fringe Benefits Tax Assessment Act 1986]

7.53          The legislation has been drafted to prevent any overlap between those employees covered by the $30,000 exemption cap and those covered by the $17,000 exemption cap as set out in subsection 5B(1E) of the Fringe Benefits Tax Assessment Act 1986. The legislation also ensures that the original intent of the amendments made in 2012 and 2013, which extended new special conditions in Division 50 of the ITAA 1997, also applied to FBT.
[Schedule 7, item 14, section 5B of Fringe Benefits Tax Assessment Act 1986]

7.54          This amendment will apply retrospectively to the 2017-18 FBT year and later FBT years. This retrospective application will align the amendment with the FBT amendment period. The retrospective application is appropriate as it is wholly beneficial to affected stakeholders.
[Schedule 7, item 16]

Part 4 - Other amendments

7.55          The Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 implements the Government’s response to recommendation 2.10 of the Financial Services Royal Commission Final Report by establishing the Financial Services and Credit Panel, located within ASIC, as the single disciplinary body for relevant providers.

7.56          The Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 also introduces a new registration system for relevant providers to improve the accountability and transparency of the financial services sector.

7.57          The Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 commenced on 1 January 2022

Amendments to the ASIC Act and Corporations Act 2001

7.58          A ‘relevant provider’ is defined in section 910A of the Corporations Act 2001 as an individual who is authorised to provide personal advice to retail clients in relation to relevant financial products, as the holder of an Australian financial services licence or on behalf of the licensee.

7.59          However, an unintended consequence of the amendments was that, by applying only to relevant providers, the Financial Services and Credit Panel’s ability to effectively perform the following functions as was intended is affected:

·                     to give a copy of instruments made against an affected person;

·                     to vary or revoke instruments taking administrative action against relevant providers; and

·                     to make a recommendation to ASIC that it apply to the court for a civil penalty.

7.60          To address this, Schedule 7 to the Bill makes the following amendments to the requirements in Division 8B of Part 7.6 of the Corporations Act 2001 (Action against relevant providers) to:

·                     clarify the requirements for registration prohibition orders in subsection 921L(1) of the Corporations Act 2001 to recognise that a person who is given a registration prohibition order by a Financial Services and Credit Panel may subsequently cease to be a relevant provider and that a person who is given an order is not eligible to be registered following a registration prohibition order until after the end day specified in the order;

·                     amend section 921M of the Corporations Act 2001 to provide that a copy of an instrument taking administrative action against a relevant provider made by a Financial Services and Credit Panel must be given to an affected person (i.e. the person against whom the instrument is made), whether or not the person is a relevant provider at the time the copy of the instrument is given;

·                     amend section 921N of the Corporations Act 2001 to provide for an instrument made by a Financial Services and Credit Panel to be varied or revoked, whether or not the person is a relevant provider at the time the variation or revocation is sought. This amendment is important to ensure that a person who ceases to be a relevant provider after an instrument is made against them retains the right to apply to vary or revoke the instrument; and

·                     amend section 921Q of the Corporations Act 2001 to provide that a Financial Services and Credit Panel may make a recommendation that ASIC apply to the court for a civil penalty to be imposed against a person who was a relevant provider at the time the alleged contravention of a restricted civil penalty provision took place, whether or not the person is a relevant provider at the time the recommendation is made. This amendment ensures that a person who is alleged to have contravened a restricted civil penalty provision is not able to avoid civil proceedings by ceasing to be a relevant provider.
[Schedule 7, items 19 to 29, sections 921L, 921M, 921N and 921Q of the Corporations Act 2001]

7.61          To support these amendments, the legislation makes a consequential amendment to paragraph 157(3)(b) of the Australian Securities and Investments Act 2001 to reflect the revised section heading for section 921N of the Corporations Act 2001.
[Schedule 7, item 18, section 157 of the Australia Securities and Investments Commission Act 2001]

7.62          These amendments commence on the day after the Bill receives Royal Assent.

Amendments to the ASIC Act

7.63          The Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 provides that a member of a Financial Services and Credit Panel should be paid in accordance with an amount determined by the Remuneration Tribunal.

7.64          The Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 does not allow the Remuneration Tribunal to determine an amount of renumeration for a member of a Financial Services and Credit Panel.

7.65          To address this, Schedule 7 to the Bill provides that a member of a Financial Services and Credit Panel is to be paid the remuneration that is determined by the Remuneration Tribunal. It also provides that Minister may prescribe, by legislative instrument the allowances that are payable.

7.66          Section 143 of the Australia Securities and Investments Commission Act 2001 (which was inserted by the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021) provides for allowances of members of a Financial Services and Credit Panel only. However, section 143 should also cover remuneration, as well as allowances, of members of a Financial Services and Credit Panel.

7.67          The amendments amend the provision to provide for the remuneration of FSCP members as well as for allowances. No allowances or remuneration are payable until a panel is convened to hear a matter.

7.68          These amendments commence on the day after the Bill receives Royal Assent. [Schedule 7, item 17, section 143 of the ASIC Act]

Other amendments to the Corporations Act 2001

7.69          Under section 1014BA of the Corporations Act 2001, trustees of regulated superannuation funds are obliged to make certain information publicly available. These obligations are not intended to extend to self-managed superannuation funds or small APRA funds.

7.70          The Treasury Laws Amendment (Self Managed Superannuation Funds) Act 2021 amended the Corporations Act 2001 (and other Acts) to increase the maximum number of allowable members in a self managed superannuation fund and small APRA fund from four to six. Consequential amendments in that Act and the Treasury Laws Amendment (Your Future, Your Super) Act 2021 to various Treasury laws to give effect to this change. The consequential amendment to section 1014BA(1) of the Corporations Act 2001 was not included in either Bill.

7.71          The amendment in item 30 makes that consequential change to ensure self managed superannuation funds and small APRA funds do not need to comply with the obligation to publish the required information about the fund.
[Schedule 7, item 30, section 1017BA of the Corporations Act 2001]

7.72          The amendment applies in relation to regulated superannuation funds with 6 or fewer members on and after 1 July 2021. This ensures that all self managed superannuation funds and small APRA funds are not adversely impacted as a result of the amendment not being made when the higher member caps were introduced.
[Schedule 7, item 31, section 1697 of the Corporations Act 2001]

Part 5 - Amendments of Acts in other portfolios to allow commutation of certain income streams

7.73          Part 5 of Schedule 7 to the Bill makes amendments to Acts in other portfolios to provide for certain commutations for the purposes of not exceeding the transfer balance cap. These amendments apply to market-linked and life expectancy products only.

Amendment to the Social Security Act 1991

7.74          The Schedule amends the Social Security Act 1991 to insert a new subparagraph (ivc) after subparagraph 9B(2)(h)(ivb) to allow life expectancy income streams to be commuted to the extent necessary in order to comply with section 136-80 in Schedule 1 to the TAA 1953.

Subsection 9B(2) of the Social Security Act 1991 sets out the characteristics that the contract or governing rules of an income stream must possess so that the life expectancy income stream can qualify for asset-test exempt status under section 9B. One of the characteristics that the rules must specify include that the income stream cannot be commuted except in the circumstances listed in paragraph (2)(h).
[Schedule 7, item 32, section 9B(2) of the Social Security Act 1991]

7.75          The Schedule amends the Social Security Act 1991 to insert a new subparagraph (via) after subparagraph 9BA(2)(f)(vi) to allow market-linked income streams to be commuted to the extent necessary in order to comply with section 136-80 in Schedule 1 to the TAA 1953.

Subsection 9BA (2) sets out the characteristics that the contract or governing rules of an income stream must possess so that the market-linked income stream can qualify for asset-test exempt status under section 9BA. One of the characteristics that the rules must specify include that the income stream cannot be commuted except in the circumstances listed in paragraph (2)(f).
[Schedule 7, item 33, section 9BA(2) of the Social Security Act 1991]

Amendment to the Veterans’ Entitlements Act 1986

7.76          The amendment at item 34 amends the Veterans’ Entitlements Act 1986 to insert a new subparagraph (ivc) in paragraph 5JB(2)(h) to allow life expectancy income streams to be commuted to the extent necessary in order to comply with section 136-80 in Schedule 1 to the TAA 1953. Subsection 5JB(2) sets out the characteristics that the contract or governing rules of an income stream must possess so that the life expectancy income stream can qualify for asset-test exempt status under section 5JB.  One of the characteristics that the rules must specify include that the income stream cannot be commuted except in the circumstances listed in paragraph 5JB(2)(h).
[Schedule 7, item 34, section 5JB(2) Veterans’ Entitlements Act 1986]

7.77          The amendment at item 35 amends the Veterans’ Entitlements Act 1986 to insert a new subparagraph (via) in paragraph 5JBA(2)(f) to allow market-linked income streams to be commuted to the extent necessary in order to comply with section 136-80 in Schedule 1 to the TAA 1953. Subsection 5JBA(2) sets out the characteristics that the contract or governing rules of an income stream must possess so that the market-linked income stream can qualify for asset-test exempt status under section 5JBA.  One of the characteristics that the rules must specify include that the income stream cannot be commuted except in the circumstances listed in paragraph (2)(f).
[Schedule 7, item 35, section 5JBA(2) Veterans’ Entitlements Act 1986]

 


Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022
Income Tax Amendment (Labour Mobility Program) Bill 2022

Table of Contents:  

Schedule 1 – Assisting businesses to meet their record-keeping obligations  92

Overview.. 92

Human rights implications. 93

Conclusion.. 93

Schedule 2 – Income tax and withholding exemptions for the FIFA Women’s World Cup  93

Overview.. 93

Human rights implications. 93

Conclusion.. 93

Schedule 3 – Intangible asset depreciation.. 94

Overview.. 94

Human rights implications. 94

Conclusion.. 94

Schedule 4 – Unfair contract terms. 94

Overview.. 94

Human rights implications. 95

Right to a fair trial 95

Right to work. 96

Right to an adequate standing of living, including food, water and housing  97

Conclusion.. 98

Schedule 5 – Recovery grants for Cyclone Seroja. 98

Overview.. 98

Human rights implications. 98

Conclusion.. 98

Schedule 6 – Tax treatment for new or revised visa programs and Income Tax Amendment (Labour Mobility Program) Bill 2022. 99

Overview.. 99

Human rights implications. 99

Conclusion.. 99

Schedule 7 – Minor and technical amendments. 99

Overview.. 99

Human rights implications. 100

Conclusion.. 100

 

 

Schedule 1 – Assisting businesses to meet their record-keeping obligations

Overview

8.1              Schedule 1 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.

8.2              Schedule 1 to the Bill amends Schedule 1 to the TAA 1953 to empower the Commissioner of Taxation to direct an entity to complete an approved record-keeping course where the Commissioner reasonably believes the entity has failed to comply with its tax-related record‑keeping obligations as an alternative to existing financial penalties.

Human rights implications

8.3              Schedule 1 to the Bill does not engage any of the applicable rights or freedoms.

Conclusion

8.4              Schedule 1 to the Bill is compatible with human rights as it does not raise any human rights issues.

Schedule 2 – Income tax and withholding exemptions for the FIFA Women’s World Cup

Overview

8.5              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.

8.6              Schedule 2 to the Bill amends section 50-45 of the ITAA 1997 to prescribe FIFA and its wholly owned Australian subsidiary, FWWC2023 Pty Ltd, as income tax exempt for a certain period associated with delivering the 2023 FIFA Women’s World Cup.

8.7              Schedule 2 to the Bill also amends section 128B(3)(a)(i) of the ITAA 1936 to prescribe FIFA and its wholly owned Australian subsidiary, FWWC2023 Pty Ltd, as exempt from withholding tax for a certain period associated with delivering the 2023 FIFA Women’s World Cup.

Human rights implications

8.8              Schedule 2 to the Bill does not engage any of the applicable rights or freedoms.

Conclusion

8.9              Schedule 2 to the Bill is compatible with human rights as it does not raise any human rights issues.

Schedule 3 – Intangible asset depreciation

Overview

8.10          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..

8.11          In the 2021-22 Budget, the Government announced the Digital Economy Strategy, which outlines actions and policies the Government is taking to grow Australia’s future as a modern and leading digital economy by 2030. The Strategy included measures to empower businesses to grow investment in digital technologies, one of which is to allow taxpayers to self‑assess the effective life of certain intangible depreciating assets.

8.12          Schedule 3 to the Bill amends the ITAA 1997 to provide taxpayers with the choice to self‑assess the effective life of certain intangible depreciating assets they start to hold on or after 1 July 2023, rather than using the statutory effective life currently specified in the law.

Human rights implications

8.13          Schedule 3 to the Bill does not engage any of the applicable rights or freedoms.

Conclusion

8.14          Schedule 3 is compatible with human rights as it does not raise any human rights issues.

Schedule 4 – Unfair contract terms

Overview

8.15          Schedule 4 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.

8.16          Schedule 4 to the Bill amends the ACL and the ASIC Act to strengthen and clarify the existing unfair contract terms provisions and to reduce the prevalence of unfair contract terms in consumer and small business standard form contracts. The amendments introduce a civil penalty provision prohibiting the use of unfair contract terms in standard form contracts. The amendments also expand the class of contracts that are covered by the unfair contract terms provisions.

8.17          A review of the existing provisions in 2018 found that they did not provide strong deterrence against businesses using unfair contract terms in their standard form contracts.

Human rights implications

8.18          Schedule 4 to the Bill engages the following human rights and freedoms:

·                     The right to a fair trial;            

·                     The right to work; and

·                     The right to adequate standing of living, including food, water and housing.

Right to a fair trial

8.19          Schedule 4 to the Bill engages the right to a fair trial in Article 14 of the International Covenant on Civil and Political Rights (ICCPR) through the introduction of civil penalty provisions for the use of unfair contract terms. The civil penalty provisions contained in this Schedule are consistent with existing penalties in the CCA and the ASIC Act for similar contraventions. See Schedule 4 to the Bill, items 1 and 2.

8.20          The maximum penalty that can be issued under these provisions in the ACL can be found in section 224 of the ACL and for an individual is $500,000.

8.21          The maximum penalty that can be issued under these provisions in the ASIC Act can be found in section 12GBCA of the ASIC Act. For an individual the maximum penalty is the greater of:

·                     5,000 penalty units; or

·                     if the court can determine the amount of the benefit derived and  detriment avoided because of the contravention, that amount multiplied by 3.

8.22          The civil penalty provisions contained in this Schedule are not ‘criminal’ for the purposes of human rights law. While a criminal penalty is deterrent or punitive, these provisions are regulatory and disciplinary as this is a more appropriate response to regulation of contractual rights. Further, the provisions do not apply to the general public, but to a sector or class of people who should reasonably be aware of their obligations and who exist in a specific regulatory context under both the CCA and the ASIC Act. The civil penalty regime is intended to only apply to businesses and individuals acting in relation to a business who breach the unfair contract terms regime.

8.23          As bodies corporate are not protected by relevant human rights law, contraventions by bodies corporate do not engage Article 12 of the ICCPR.

8.24          Imposing the civil penalties will encourage increased compliance with the law and deter the use of unfair terms in standard form contracts. Also, while the civil penalties do at first appear substantial, they are the maximum penalty available. Courts are not required to impose penalties at the maximum level. Courts assess the appropriate and proportionate level of penalty to impose in each case up to the maximum. There are a range of considerations that courts consider when determining the appropriate quantum of penalties to be imposed.  Based on the above factors, the cumulative effect and the nature and severity of the civil penalties in Schedule 4 to the Bill are not ‘criminal’ for the purposes of human rights law.

8.25          To the extent Schedule 4 to the Bill engages Article 14 of the ICCPR, it does so appropriately and is consistent with the Bill’s objectives.

8.26          This is because of the need to encourage compliance with the unfair contract terms protections. Failure to create this disincentive will likely result in unfair terms continuing to be prevalent in standard form contracts, impacting consumers and small businesses. Penalties are required to adequately incentivise compliance.

Right to work

8.27          The Bill engages the right to work under Articles 6(1), 7 and 8(1)(a) of the International Covenant on Economic, Social and Cultural Rights (ICESCR).

8.28          The right to work provides that everyone must be able to freely accept or choose their work, and includes a right not to be unfairly deprived of work.

8.29          Any negative impact on the right to work must be directed towards a legitimate objective, be rationally connected to (that is, effective to achieve) that objective, and be proportionate. Schedule 4 to the Bill meets these criteria.

8.30          Schedule 4 to the Bill is relevant to the right to work as both ASIC and the ACCC can seek disqualification orders from a court to prevent a person from managing a corporation. These orders can only be sought where the relevant conditions are satisfied and that person has been involved in breaches of the unfair contract terms regime. This would engage the right to work as it prevents the relevant person from working as a director of a company or engaging in any major management of a body corporate.

8.31          The objective of Schedule 4 to the Bill is to reduce the prevalence of unfair contract terms in standard form contracts. The objective is necessary to ensure that consumers and small business are not subject to detriment in situations where they lack adequate bargaining power and suffer loss or damage as a result. The objective addresses the current lack of disincentive to include unfair terms in contracts. This issue is pressing and substantial enough to warrant limiting these rights, because consultation has shown that unfair contract terms continue to be prevalent in standard form contracts, negatively impacting consumers and small businesses.

8.32          This Schedule is connected to the objective of preventing the use of unfair contract terms, as it is an effective way to achieve that objective. Disqualification orders provide an effective way to achieve this objective as they are a disincentive against the use of unfair contract terms by directors and executive employees of companies who may seek to take advantage of consumers or small businesses. This creates a strong incentive for these directors and employees to review their terms to ensure they comply with the unfair contract terms provisions.

Right to an adequate standing of living, including food, water and housing

8.33          This Schedule positively engages the right to an adequate standard of living, including food, water and housing, under Article 11 of the ICESCR.

8.34          The right to an adequate standard of living requires Australia to take appropriate steps towards the realisation of this right in its jurisdiction, and that the relevant standard must be continuously improving.

8.35          This Schedule improves the standard of living in Australia through the expansion of protections against the use of unfair contract terms. The introduction of new civil penalty provisions for the use of unfair contract terms contained in this Schedule is consistent with ensuring the right to an adequate standard of living by protecting Australian consumers from unfair business practices that may impact their ability to access this right. See Schedule 4 to the Bill, items 1 and 2.

8.36          The existing unfair contract terms provisions apply to a contract for a good or service and for a sale or grant of an interest in land. The introduction of a stronger framework surrounding unfair contract terms, discourages actions that may obstruct access to housing, through the use of unscrupulous contract terms, such as where the term is not reasonably necessary to protect the legitimate interests of the seller. In this way, the unfair contract terms reforms protect consumers’ rights to an adequate standard of living by ensuring that where the bargaining powers are unbalanced, consumers are not taken advantage of and deprived of this right.

8.37          This Schedule positively engages the right to an adequate standing of living, including food, water, and housing in Article 11 of the ICESCR.

8.38          To the extent Schedule 4 to the Bill engages Article 11, it does so appropriately and positively, consistent with the Bill’s objectives.

Conclusion

8.39          Schedule 4 to the Bill is compatible with the human rights it engages and does not unnecessarily, unreasonably or disproportionately limit the right to a fair trial, or the right to work, and positively supports the right to an adequate standing of living, including food, water, and housing.

Schedule 5 – Recovery grants for Cyclone Seroja

Overview

8.40          Schedule 5 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.

8.41          Schedule 5 to the Bill amends the ITAA 1997 to provide further support for small businesses and medium and large primary producers impacted by Cyclone Seroja in April 2021. Schedule 5 to the Bill makes grants received under Category C of the Disaster Recovery Funding Arrangements 2018 in relation to Cyclone Seroja non-assessable and non-exempt income for income tax purposes.

Human rights implications

8.42          Schedule 5 to the Bill does not engage any of the applicable rights or freedoms.

Conclusion

8.43          Schedule 5 to the Bill is compatible with human rights as it does not raise any human rights issues.

Schedule 6 – Tax treatment for new or revised visa programs and Income Tax Amendment (Labour Mobility Program) Bill 2022

Overview

8.44          Schedule 6 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 are 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.

8.45          Schedule 6 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 make amendments to reduce the effective tax rate on certain income earned by foreign resident workers participating in the Australian Agriculture Worker Program or the Pacific Australia Labour Mobility scheme from 32.5 per cent to 15 per cent.

8.46          This ensures that such workers pay tax at an appropriate rate on program income, consistent with similar migration programs.

Human rights implications

8.47          Schedule 6 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 do not engage any of the applicable rights or freedoms.

Conclusion

8.48          Schedule 6 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 are compatible with human rights as they do not raise any human rights issues.

Schedule 7 – Minor and technical amendments

Overview

8.49          Schedule 7 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.

8.50          Schedule 7 to the Bill makes a number of miscellaneous and technical amendments to various laws in the Treasury portfolio. The amendments are part of the Government’s ongoing commitment to the care and maintenance of Treasury portfolio legislation.

8.51          The amendments make minor and technical changes to correct typographical and number errors, repeal inoperative provisions, remove administrative inefficiencies, address unintended outcomes, and ensure that the law gives effect to the original policy intent.

Human rights implications

8.52          Schedule 7 to the Bill does not engage any of the applicable rights or freedoms.

Conclusion

8.53          Schedule 7 to the Bill is compatible with human rights as it does not raise any human rights issues.