Federal Register of Legislation - Australian Government

Primary content

A Bill for an Act to amend the Foreign Acquisitions and Takeovers Fees Imposition Act 2015, 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 08 Sep 2022
Introduced HR 08 Sep 2022
Table of contents.

2022

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Treasury Laws Amendment (2022 Measures No. 3) Bill 2022
Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2022
Income Tax Amendment (Labour Mobility Program) Bill 2022

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by authority of the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP)

 

 


Table of Contents

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

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

Foreign acquisitions and takeovers penalties............................................ 7

Data sharing to support government responses to major disasters...... 15

Modification power........................................................................................ 21

Tax treatment for new or revised visa programs....................................... 25

Faith-based products.................................................................................... 33

Statement of Compatibility with Human Rights....................................... 41

 

 

 


This Explanatory Memorandum uses the following abbreviations and acronyms.

Abbreviation

Definition

APRA

Australian Prudential Regulation Authority

the Bill

Treasury Laws Amendment (2022 Measures No.3) Bill 2022

Coronavirus (Measures No. 2) Act

Coronavirus Economic Response Package Omnibus (Measures No. 2)
Act 2020

Corporations Act

Corporations Act 2001

COVID-19

Coronavirus known as COVID-19

FATA

Foreign Acquisitions and Takeovers Act 1975

FATA Fees Act

Foreign Acquisitions and Takeovers Fees Imposition Act 2015

FATA Fees Bill

Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2022

ICCPR

International Covenant on Civil and Political Rights

ICERD

International Convention on the Elimination of All Forms of Racial Discrimination

ITAA 1997

Income Tax Assessment Act 1997

NED Act 2020

National Emergency Declaration Act 2020

SIS Act

Superannuation Industry (Supervision) Act 1993

SIS Regulations

Superannuation Industry (Supervision) Regulations 1994

TAA 1953

Taxation Administration Act 1953

 

 


General outline and financial impact

Foreign acquisitions and takeovers penalties

Outline

Schedule 1 to the Bill amends the FATA to double the maximum financial penalties for contraventions of provisions that relate only to residential land.

The FATA Fees Bill amends the FATA Fees Act to update the fee cap amount to incorporate indexation and the dates referred to in the indexation provisions.

Date of effect

Schedule 1 to the Bill will commence on 1 January 2023.

The FATA Fees Bill will commence the day after Royal Assent.

Proposal announced

This measure partially implements the Government’s 2022 election commitment to double foreign investment fees and penalties.

Financial impact

This measure is estimated to increase receipts by $2.3 million over the four years from 2022-23.

All figures in this table represent amounts in $m, rounded to the nearest $0.1m each year.

2022-23

2023-24

2024-25

2025-26

0.3

0.7

0.7

0.7

Human rights implications

Schedule 1 to the Bill and the FATA Fees Bill raise human rights issues. See Statement of Compatibility with Human Rights — Chapter 6.

Compliance cost impact

This measure does not have any compliance cost impact.

Data sharing to support government responses to major disasters

Outline

Schedule 2 to the Bill amends the TAA 1953 to allow protected information to be disclosed to Australian government agencies for the purpose of administering major disaster support programs approved by the Minister.

Date of effect

Schedule 2 to the Bill commences on the day after Royal Assent and applies in relation to records and disclosures of information made on or after the commencement of the amendments, regardless of whether the information was obtained before, on or after that commencement.

Proposal announced

Not previously announced.

Financial impact

No financial impact.

Human rights implications

Schedule 2 to the Bill is compatible with human rights as it does not limit any applicable human rights or freedoms. See Statement of Compatibility with Human Rights — Chapter 6.

Compliance cost impact

Schedule 2 to the Bill is unlikely to have a more than minor regulatory impact.

Modification power

Outline

This schedule was prepared by the Attorney-General’s Department

Schedule 3 to the Bill amends Schedule 5 of the Coronavirus (Measures No. 2) Act. This amendment will extend a temporary mechanism for responsible Ministers to make alternative arrangements for meeting information and documentary requirements under Commonwealth legislation, including requirements to give information and produce, witness and sign documents, in response to the challenges posed by COVID-19. This mechanism currently terminates at the end of 31 December 2022, when Schedule 5 to the Coronavirus (Measures No. 2) Act self-repeals. Any determinations made under Schedule 5 to the Coronavirus (Measures No. 2) Act to put in place alternative arrangements have no operation after 31 December 2022. Schedule 3 to the Bill will ensure that the mechanism in Schedule 5 to the Coronavirus (Measures No. 2) Act will continue to be available to responsible Ministers until the end of 31 December 2023 and that any determinations made under Schedule 5 will have no operation after 31 December 2023.

Date of effect

The amendments commence the day after Royal Assent.

Proposal announced

Not previously announced.

Financial impact

No financial impact.

Human rights implications

Schedule 3 to the Bill does not raise human rights issues. See Statement of Compatibility with Human Rights — Chapter 6.

Compliance cost impact

This measure does not have any compliance cost impact.

Tax treatment for new or revised visa programs

Outline

Schedule 4 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 make amendments to reduce the tax rate on certain income earned by foreign resident workers participating in the Pacific Australia Labour Mobility scheme from marginal rates starting at 32.5 per cent to a flat 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 the Pacific Australia Labour Mobility scheme with effect from 1 July 2022.

Proposal announced

Schedule 4 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 partially implement the Pacific Labour Mobility – reforms measure from the 2021-22 Mid-Year Economic and Fiscal Outlook.

Financial impact

The Pacific Labour Mobility – reforms measure was estimated to increase receipts by $165.0 million over the then 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 was 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 goods and services tax receipts of $50.0 million over the then forward estimates period that will subsequently be paid to the States and Territories.

Human rights implications

Schedule 4 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 do not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 6.

Compliance cost impact

This measure is expected to result in a negligible impact on compliance costs, as the proposed taxation arrangements are consistent with existing taxation arrangements for other labour mobility programs.

Faith-based products

Outline

Schedule 5 to the Bill amends the SIS Act to provide for an alternative annual performance test for faith-based products. APRA may determine that a product is a faith-based product if a trustee for the product provides APRA with a valid application.

Date of effect

Schedule 5 to the Bill will commence on the day the Bill receives Royal Assent.

Proposal announced

Schedule 5 to the Bill fully implements the ‘End super fund religious discrimination’ commitment announced on 13 December 2021, and during the 2022 Federal Election.

Financial impact

Nil.

Human rights implications

Schedule 5 to the Bill raises human rights issues. See Statement of Compatibility with Human Rights — Chapter 6.

Compliance cost impact

Low.

 


Table of Contents:

Outline of chapter 7

Context of amendments. 7

Comparison of key features of new law and current law.. 8

Detailed explanation of new law.. 9

Offence provision.. 9

Civil penalty provisions. 10

Consequential amendments. 12

Commencement, application, and transitional provisions. 13

 

Outline of chapter

1.1              Schedule 1 to the Bill amends the FATA to double the maximum financial penalties for contraventions of provisions that relate only to residential land.

Context of amendments

1.2              Foreign investment plays an important and beneficial role in the Australian economy. However, it is necessary to regulate certain kinds of foreign investment to ensure that the proposed investments are not contrary to Australia’s national interest.

1.3              The FATA provides that a foreign person must seek foreign investment approval before acquiring an interest in Australian residential land and imposes obligations on a foreign person who acquires an interest in residential land. Residential land is land in Australia where there is at least one dwelling on the land (or the number of dwellings that could reasonably be built on the land is less than 10) and does not include land that is used wholly and exclusively for a primary production business or on which the only dwellings are commercial residential premises. When considering an application for a foreign person to acquire an interest in residential land, the overarching principle is that the proposed acquisition should add to Australia’s housing stock.

1.4              Maintaining strong compliance with Australia’s foreign investment framework is a priority for the Australian Government and is critical to ensuring the credibility and effectiveness of Australia’s foreign investment regime. The residential land provisions in the FATA play an important role in managing housing affordability for Australians.

1.5              The FATA contains specific penalties for contraventions of residential land provisions. The amendments double the maximum financial penalties in the FATA for contraventions of residential land provisions. The purpose of this increase to financial penalties is to ensure that these penalties effectively deter foreign persons from contravening the residential land provisions in the FATA. Non-compliance with the residential land provisions in the FATA may have a significant impact on Australia’s housing stock and housing affordability, and foreign persons can make a significant financial gain by obtaining an interest in Australian residential land.

Comparison of key features of new law and current law

Table 1.1 Comparison of new law and current law

New law

Current law

The penalty for contravening section 88 of the FATA will be imprisonment for 10 years, or 30,000 penalty units (or 300,000 penalty units if the developer is a corporation), or both.

The penalty for contravening section 88 of the FATA is imprisonment for 10 years, or 15,000 penalty units (or 150,000 penalty units if the developer is a corporation), or both.

The maximum penalty for contravening sections 94, 95, 95A or 96 of the FATA will be the greatest of the following:

(a) double the amount of the capital gain that was made or would be made on the disposal of the interest in the relevant residential land/established dwelling;

(b) 50% of the consideration for the residential land/established dwelling acquisition;

(c) 50% of the market value of the interest in the relevant residential land/established dwelling.

The maximum penalty for contravening sections 94, 95, 95A or 96 of the FATA is the greatest of the following:

(a) the amount of the capital gain that was made or would be made on the disposal of the interest in the relevant residential land/established dwelling;

(b) 25% of the consideration for the residential land/established dwelling acquisition;

(c) 25% of the market value of the interest in the relevant residential land/established dwelling.

The penalty for contravening sections 97, 115D, 115DA or 115G of the FATA will be 500 penalty units.

The penalty for contravening sections 97, 115D, 115DA or 115G of the FATA is 250 penalty units.

Detailed explanation of new law

1.6              The FATA contains specific penalties for contraventions of provisions relating to residential land. Schedule 1 to the Bill doubles the maximum financial penalties for contraventions of all provisions in the FATA that relate only to residential land. The FATA also contains other penalty provisions that apply to residential land and non-residential land matters. These broader penalty provisions are not being amended.

Offence provision

1.7              Section 88 of the FATA provides that a person commits an offence if the person is a developer and sells a new dwelling to a foreign investor without complying with a condition in an exemption certificate to advertise the dwelling in Australia.

1.8              The financial penalty for failing to advertise a new dwelling will be doubled to 30,000 penalty units for individuals and 300,000 penalty units for corporations.
[Schedule 1, items 1 and 2, subsection 88(1) of the FATA]

1.9              Failing to advertise a new dwelling is an offence provision which can attract a penalty of imprisonment, a financial penalty or both. This amendment only increases the financial penalty for this provision.

1.10          The Attorney-General’s Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers was considered during the development of the new penalty in section 88 of the FATA. The guide suggests an appropriate fine to imprisonment ratio is 5, or 5 penalty units for every 1 month of imprisonment. A departure from this ratio is warranted for the financial penalty in section 88 because the section relates to developers who can obtain a substantial financial benefit from committing an offence.

1.11          Non-compliance with section 88 may also have a significant impact on Australia’s housing stock and housing affordability. A higher fine to imprisonment ratio is required to deter non-compliance, and to ensure paying a financial penalty does not become a cost of doing business. The higher financial penalty in section 88 will neutralise any financial benefits or gains obtained from non-compliance and provides an adequate penalty for the worst possible case of non-compliance.

1.12          The penalty provision specifies a penalty unit amount for individuals and corporations. The corporate multiplier for this financial penalty is a factor
of 10. This is higher than the standard factor of 5. This higher penalty for corporations is necessary and appropriate to ensure that a corporation does not obtain financial benefits from illegal behaviour and to recognise the significant financial benefits that can be obtained by not complying with the provision. Corporate bodies can be well resourced and may see the financial penalties as a cost of doing business. To ensure financial penalties act as an adequate deterrent, punish illegal behaviour and are commensurate to the size and capacity of corporate bodies, a higher penalty applies to corporations. This provides an adequate penalty that will deter and punish illegal behaviour.

Civil penalty provisions

1.13          The FATA contains specific civil penalty provisions relating only to residential land. The penalty in these civil penalty provisions will be doubled.

1.14          Schedule 1 to the Bill doubles the penalty units from 250 penalty units to 500 penalty units for the following civil penalty provisions:

·                     a person contravenes a condition in a no objection notification, notice imposing conditions or exemption certificate relating to a residential land acquisition requiring the person to give a notice to the Treasurer when the person acquires or disposes of the interest in the relevant residential land or the sale of a dwelling on the relevant residential land to be advertised in Australia;

·                     a foreign person has not given a vacancy fee return to the Commissioner of Taxation for a dwelling within 30 days after the end of the vacancy year;

·                     a foreign person has given a vacancy fee return to the Commissioner of Taxation that contains information that is false or misleading in a material particular; and

·                     a foreign person has not kept records that record and explain all transactions and other acts the person engages in that are relevant to the person’s liability for vacancy fees for each dwelling on the land in each vacancy year.
[Schedule 1, item 11, subsections 97(1), 97(1A), 97(2), 115D(1), 115DA(1) and 115G(1) of the FATA]

1.15          The FATA also contains civil penalty provisions for residential land acquisitions that specifies a method of calculating the financial penalty fixed to the value of the interest. This means that the financial penalty has the same impact on any gain made regardless of the value of the interest. This type of penalty is specified for the following civil penalty provisions:

·                     a foreign person acquires residential land without first notifying the Treasurer under section 81, or acquires the residential land before the time period specified in section 82;

·                     a person is a foreign person who is:

                    a temporary resident that holds an interest in more than one established residential dwelling at the same time; or

                    not a temporary resident and acquires an interest in an established residential dwelling;

·                     a person takes an action relating to a residential land acquisition when prohibited under paragraph 79A(3)(b) or subsection 79A(4); and

·                     a person contravenes a condition in a no objection notification, notice imposing conditions or exemption certificate relating to a residential land acquisition.

1.16          The penalty for these contraventions is being amended so that the maximum penalty is the greatest of the following:

·                     double the capital gain that was or would be made on the disposal of the residential land/established dwelling;

·                     50 per cent of the consideration for the residential land/established dwelling acquisition;

·                     50 per cent of the market value of the interest in the residential land/established dwelling.
[Schedule 1, items 3, 4, 5, 6, 7, 8, 9 and 10, sections 94, 95, 95A and 96 of the FATA]

1.17          The maximum civil penalties for contraventions of provisions in the FATA that relate only to residential land are being doubled to ensure that the penalties provide a meaningful deterrent to non-compliance as the impact of non-compliance can cause serious harm to Australia’s national interest. Failure to comply with the residential land provisions in the FATA can impact Australia’s housing stock and the affordability of Australian residential property. It may also create community distrust in the foreign investment framework.

1.18          The new maximum civil penalties for residential land provisions in the FATA are considered appropriate to adequately deter non-compliance, encourage proactive compliance and ensure that the financial penalties are not considered by foreign persons as a cost of doing business. The court retains its discretion to determine what financial penalty to impose up to the new maximum amounts. This discretion includes considerations such as the nature and extent of the contravention, the circumstances in which the contravention took place and previous conduct of the person.

Consequential amendments

1.19          As part of the Government’s commitment to double foreign investment fees and penalties, amendments have recently been made to the Foreign Acquisitions and Takeovers Fees Imposition Regulations 2020 to double the fee amounts. The doubled fee amounts incorporated the cumulative total of indexation prior to the doubling. The FATA Fees Bill amends the FATA Fees Act to incorporate the cumulative total of the indexation for the same time period into the fee cap amount (but the fee cap is not doubled). This avoids the mathematical possibility of slight divergences in indexation between the FATA Fees Act and the Foreign Acquisitions and Takeovers Fees Imposition Regulations 2020 and ensures a consistent and coherent indexation process for all fee amounts in Australia’s foreign investment framework.

1.20          The FATA Fees Act specifies the maximum fee that can be imposed by the FATA. The Foreign Acquisitions and Takeovers Fees Imposition Regulations 2020 prescribes the fees imposed by the FATA. The amount of a fee prescribed in the regulations cannot exceed the fee cap amount in the FATA Fees Act.

1.21          The amendments reflect the operation of the existing fee cap and mechanically update the applicable figures and references in the legislation. Future indexation will apply from 1 July 2023.

1.22          The FATA Fees Bill makes the following amendments:

·                     updates the fee cap from $1 million to $1,045,000 to reflect the current indexed amount;
[Schedule 1, item 1, subsection 6(3)of the FATA Fees Act]

·                     updates the indexation date to 1 July 2023; and
[Schedule 1, item 2, subsection 7(1)of the FATA Fees Act]

·                     updates the denominator in the indexation factor formula to refer to 31 March 2022.
[Schedule 1, item 3, subsection 8(1) of the FATA Fees Act]

1.23          The new fee cap amount incorporates the indexation process that has occurred to date. The fee cap amount is not being increased more than the indexed fee cap amount.

1.24          The FATA Fees Bill commences the day after Royal Assent.

Commencement, application, and transitional provisions

1.25          The amendments to the FATA commence on 1 January 2023.

1.26          The amendments to the FATA apply to contraventions that occur on or after 1 January 2023. The amendments to the civil penalty for contraventions of subsection 95(1) of the FATA, which relates to a temporary resident holding an interest in more than one established dwelling, also apply to contraventions that start before 1 January 2023 and continue after 1 January 2023. A higher penalty for a continuing contravention of subsection 95(1) reflects the seriousness of continuing to contravene the provision and will better deter temporary residents from continuing to hold an interest in multiple established dwellings, which has a direct impact on Australia’s housing market.
[Schedule 1, item 12]

 


Table of Contents:

Outline of chapter 15

Context of amendments. 15

Comparison of key features of new law and current law.. 16

Detailed explanation of new law.. 16

Consequential provisions. 19

Commencement, application, and transitional provisions. 19

 

Outline of chapter

2.1              Schedule 2 to the Bill amends the tax secrecy provisions in the TAA 1953 to allow tax information to be disclosed to Australian government agencies for the purposes of administering major disaster support programs approved by the Minister.

Context of amendments

2.2              Information collected by the Australian Taxation Office under a tax law that meets certain criteria is considered protected information under the TAA 1953. Protected information has been used by Australian government agencies, including States and Territory governments, to verify an applicant’s eligibility to access a range of support payments (for example, the recent COVID-19 related support payments). Given the sensitivity of this information, its disclosure is subject to stringent controls and protections under taxation law.

2.3              These amendments will allow a taxation officer to disclose protected information to an Australian government agency where the information is disclosed for the purposes of administering programs declared by the Minister as major disaster support programs. This will assist Australian government agencies to address the needs of individuals and businesses significantly disrupted by a major disaster event more efficiently and effectively and reduces the risk of those individuals and businesses receiving inadequate or inappropriate support.

Comparison of key features of new law and current law

Table 2.1 Comparison of new law and current law

New law

Current law

A taxation officer may disclose or record information that is protected information acquired as a taxation officer to an Australian government agency for the purpose of administering a program that is declared by the Minister to be a major disaster support program.

A taxation officer is prohibited from disclosing or recording information that is protected information acquired as a taxation officer to an Australian government agency for the purpose of administering a major disaster support program. Such disclosures would be an offence under the TAA 1953. 

Detailed explanation of new law

New exception to prohibition from disclosing protected information

2.4              Section 355-25 in Schedule 1 to the TAA 1953 provides that it is an offence for a taxation officer to disclose or record information that is protected information acquired as a taxation officer.

2.5              Subsection 355-30(1) in Schedule 1 to the TAA 1953 provides that protected information is information that was disclosed or obtained under or for the purposes of a taxation law that both relates to the affairs of an entity and identifies, or is reasonably capable of being used to identify, the entity.

2.6              Section 355-50 provides an exception to the offence if a taxation officer discloses or records information in performing duties as a taxation officer. Section 355-65 also provides an exception to the offence for disclosures made for other government purposes, which includes situations listed in table 7 in subsection 355-65(8).

2.7              Schedule 2 to the Bill inserts a new exception to the prohibition against disclosing or recording protected information. This exception applies in respect of disclosures made to an Australian government agency for the purpose of administering a program declared by the Minister to be a major disaster support program.
[Schedule 2, item 2, subsection 355-65(8) of the TAA 1953]

2.8              The term ‘Australian government agency’ is defined in subsection 995-1(1) of the ITAA 1997 and applies to the Commonwealth, a State, a Territory, as well as one of their authorities. Definitions in the ITAA 1997 apply for the purposes of Schedule 1 to the TAA 1953 (see subsection 3AA(2) of the TAA 1953).

2.9              The administration of such a program by an Australian government agency may include any compliance action undertaken by the agency in respect of the program.

2.10          On-disclosures of protected information covered by the exception are subject to a further prohibition in section 355-155 in Schedule 1 to the TAA 1953. The ‘original purpose’ exception to that prohibition in section 355-175 in Schedule 1 to the TAA 1953 will take into account any disclosures that are made for the same purposes as the new exception. This could include, for example, on-disclosures made by one agency to another where both agencies have a role in the administration of a major disaster support program that has been declared by the Minister. This could arise if one Australian government agency is tasked with a co-ordination role for the program and another is empowered to undertake compliance action connected to the program. 

2.11          Subsection 13.3(3) of the Criminal Code provides that if a defendant wishes to rely on any exemption provided by the law creating an offence then they will bear an evidential burden in relation to that matter. Therefore, a defendant bears the evidential burden in relation to the matters in this exception, as well as the existing exception for on-disclosures. The reversal of the evidential burden of proof is consistent with the Attorney-General’s Department’s A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011 edition.

2.12          It is appropriate that the evidential burden be reversed in this situation. Matters relating to the disclosure of protected information and for which purposes (such as what information is being disclosed and for what purpose the disclosure is being made) are peculiarly within the knowledge of the person making the disclosure as the defendant is the only person who will be aware of to whom the information has been disclosed or that it was disclosed in reliance of the exception. It would be significantly more difficult and costly for the prosecution to disprove these facts.

Minister can declare a major disaster support program

2.13          The Minister can, by legislative instrument, declare a program to be a major disaster support program if the Minister is satisfied that the program is, in effect, responding to the impacts of a major disaster event and directed at supporting:

               individuals whom the event has significantly impacted; or

               businesses the operations of which the event has significantly disrupted.

 [Schedule 2, item 3, subsection 355-66(1) in Schedule 1 to the TAA 1953]

2.14          The declaration of a program as being eligible for information sharing, allows, but does not require, the disclosure or recording of protected information.

2.15          An event is considered a major disaster event if:

·                     it has developed rapidly and resulted in the death, serious injury or other physical suffering of a large number of individuals or widespread damage to property or the natural environment; or

·                     it is an event to which a national emergency declaration (within the meaning of the NED Act 2020) relates (including a declaration that is no longer in force). [Schedule 2, item 3, subsection 355-66(2) in Schedule 1 to the TAA 1953]

2.16          The NED Act 2020 specifies that a national emergency declaration must not be in force for longer than 3 months (but can be further extended for additional periods of 3 months). However, under these amendments the Minister may make a declaration in relation to an event to which a national emergency declaration that is no longer in force relates. The purpose of this is to ensure that tax information may be shared to support longer-term recovery and to assist in ensuring that programs are appropriately targeted and the risk of inadequate or inappropriate support is minimised.

2.17          For a program to meet the eligibility criteria regarding purpose and effect, the program does not need to explicitly address the criteria. The Minister need only be satisfied of these circumstances.

2.18          The term ‘business’ is defined in subsection 995-1(1) of the ITAA 1997 as including any profession, trade, employment, vocation or calling, but does not include occupation as an employee. In working out whether a particular program is directed at supporting businesses, the Minister must have regard to the overall purpose and characteristics of the program.

2.19          A program that is directed entirely at supporting other entities or activities (such as not-for-profit organisations or employees who would not otherwise be eligible for support as an individual) would not be able to be the subject of a declaration. However, a program that applies to different types of entities could still be characterised as being directed at businesses if it substantially relates to supporting business entities. For example, a program that is directed at supporting businesses but also supports not-for profit organisations that are not also characterised as businesses could be a program that is directed at supporting businesses.

2.20          Authorising the Minister to declare the programs that are eligible for information sharing ensures that each program developed by the Commonwealth or by a State or Territory is actively considered and declared by the Minister as being eligible for information sharing.

2.21          To limit the time period in which the disclosure of protected information may be made, the Minister’s declaration will remain in effect for not more than two years. This limitation is an important control mechanism given the sensitivity of taxation information.
[Schedule 2, item 3, subsection 355-66(3) in Schedule 1 to the TAA 1953]

Consequential provisions

2.22          To support the amendments, Schedule 2 to the Bill makes a consequential amendment to the definition of ‘national emergency law’ in section 10 of the NED Act 2020.

2.23          The definition of ‘national emergency law’ provides a list of the provisions across the statute book that contain powers that may be enlivened, or the operation of which may be modified, while a national emergency declaration is in force. Schedule 2 to the Bill inserts an additional paragraph into the definition to provide that section 355-66 of the TAA 1953 is a national emergency law for the purposes of the NED Act 2020.

2.24          The purpose of the amendment is to enable the Minister to declare a program as a major disaster support program if the program is supporting an event in relation to which there is, or was, a national emergency declaration.
[Schedule 2, item 1, definition of national emergency law in section 10 of the NED Act 2020]

Commencement, application, and transitional provisions

2.25          The amendments commence on the day after Royal Assent.

2.26          The amendments apply in relation to records and disclosures of information made after commencement of the amendments, regardless of whether the information was obtained before, on or after that commencement.


Table of Contents:

Outline of chapter 21

Context of amendments. 21

Summary of new law.. 22

Comparison of key features of new law and current law.. 22

Detailed explanation of new law.. 22

Commencement, application, and transitional provisions. 23

 

Outline of chapter

3.1              Schedule 3 to the Bill amends Schedule 5 to the Coronavirus
(Measures No. 2) Act to extend a temporary mechanism for responsible Ministers to make alternative arrangements for meeting information and documentary requirements under Commonwealth legislation, including requirements to give information and produce, witness and sign documents,
in response to the challenges posed by COVID-19 until the end of
31 December 2023. Schedule 3 to the Bill also amends Schedule 5 to the Coronavirus (Measures No. 2) Act so that any determinations made under Schedule 5 to that Act to make alternative arrangements will have no operation after 31 December 2023.

Context of amendments

3.2              Schedule 5 to the Coronavirus (Measures No. 2) Act is a general instrument‑making power that enables responsible Ministers to make a determination adjusting arrangements for meeting information and documentary requirements under Commonwealth legislation in response to COVID-19. This mechanism has been included in Schedule 5 to the Coronavirus (Measures No. 2) Act as a temporary measure terminating at the end of 31 December 2022. In light of the ongoing nature of COVID-19 both in Australia and globally and its effects on the ability of individuals to move freely, the power to amend arrangements for meeting information and documentary requirements remains necessary.

Summary of new law

3.3              Schedule 3 to the Bill amends Schedule 5 to the Coronavirus
(Measures No. 2) Act to extend the date on which the mechanism will terminate to the end of 31 December 2023 and to provide that any determinations made under Schedule 5 to that Act to make alternative arrangements will have no operation after 31 December 2023.

Comparison of key features of new law and current law

Table 3.1 Comparison of new law and current law

New law

Current law

A Minister responsible for an Act or legislative instrument that requires or permits certain matters relating to information and documentation may determine that different arrangements apply in response to COVID-19 until the end of 31 December 2023.

A Minister responsible for an Act or legislative instrument that requires or permits certain matters relating to information and documentation may determine that different arrangements apply in response to COVID-19 until the end of 31 December 2022.

A determination made by a Minister which provides that different arrangements apply has no operation after 31 December 2023.

A determination made by a Minister which provides that different arrangements apply has no operation after 31 December 2022.

Detailed explanation of new law

3.4              Item 1 of Schedule 3 to the Bill amends subitems 1(7) and 1(8) of Schedule 5 to the Coronavirus (Measures No. 2) Act to omit ‘2022’ and replace with ‘2023’.

3.5              This item extends the operation of item 1 Schedule 5 to the Coronavirus (Measures No. 2) Act so that it is repealed at the end of 31 December 2023 rather than the end of 31 December 2022.
[Schedule 3, item 1, subitems 1(7) and (8) of Schedule 5 to the Coronavirus (Measures No. 2) Act ]

3.6              This item also extends the time in which determinations made under Schedule 5 to the Coronavirus (Measures No. 2) Act operate so that they have no operation after 31 December 2023 rather than 31 December 2022.
[Schedule 3, item 1, subitems 1(7) and (8) of Schedule 5 to the Coronavirus (Measures No. 2) Act]

Commencement, application, and transitional provisions

3.7              Schedule 3 to the Bill commences on the day after the Bill receives Royal Assent.

3.8              Item 2 of Schedule 3 to the Bill provides that the amendment of subitem 1(7) of the Coronavirus (Measures No. 2) Act applies to a determination made under subitem 1(2) of Schedule 5 to the Coronavirus (Measures No. 2) Act if the determination:

·                     was made before the commencement of item 2 of the Schedule 3 to the Bill and did not cease to have operation before that commencement; or

·                     is made on or after that commencement.
[Schedule 3, item 2]

 


Table of Contents:

Outline of chapter 25

Context of amendments. 26

Recent visa and program developments. 26

Income tax rates applying to foreign resident workers. 26

Income tax rates applying to resident workers for Australian tax purposes  27

Comparison of key features of new law and current law.. 27

Detailed explanation of new law.. 28

Rate of tax. 28

Employers required to withhold from payments under the program.. 28

Liability for final withholding tax and discharging the liability. 29

Amounts subject to final withholding tax. 29

Other administrative arrangements and settings. 29

Allowing tax arrangements to be updated by regulations. 30

Fringe benefits tax does not apply. 30

Superannuation arrangements. 30

Consequential amendments. 31

Commencement, application, and transitional provisions. 31

 

Outline of chapter

4.1              Schedule 4 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 make amendments to reduce the tax rate on certain income earned by foreign resident workers participating in the Pacific Australia
Labour Mobility scheme from marginal rates starting at 32.5 per cent to a flat 15 per cent.

4.2              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

4.3              Foreign resident workers are an essential source of labour who help meet workforce shortages in rural and regional Australia, particularly in the agriculture, meat processing, hospitality and tourism sectors. 

4.4              The Seasonal Labour Mobility Program (otherwise known as the Seasonal Worker Programme) and the Pacific Labour Scheme were consolidated into the single, streamlined Pacific Australia Labour Mobility scheme which commenced on 4 April 2022. 

4.5              The Pacific Australia Labour Mobility scheme helps to meet workforce shortages in Australia as well as providing Official Development Assistance to Pacific nations and Timor-Leste.  The Pacific Australia Labour Mobility scheme allows eligible businesses to recruit workers to help fill workforce shortages in any sector, where no suitable Australians are available. Eligible businesses can recruit workers for short-term/seasonal jobs for up to nine months or longer-term roles for between one and four years to help fill unskilled, low and semi-skilled workforce shortages.

4.6              Operational elements of the Pacific Australia Labour Mobility scheme are administered by the Department of Employment and Workplace Relations, with policy oversight, strategic communications, stakeholder engagement and international development cooperation delivered by the Department of Foreign Affairs and Trade.

Income tax rates applying to foreign resident workers

4.7              Individuals who are not residents of Australia for tax purposes (known as ‘foreign residents’ or ‘non-residents’) are taxed at marginal rates starting at 32.5 per cent from their first dollar of income. Such tax treatment may discourage participation in the Pacific Australia Labour Mobility scheme, as workers under the scheme are typically lower income earners. This would also negatively impact remittance flows which make an important contribution to the economic development of participating countries.

4.8              The amendments in Schedule 4 to the Bill are important in ensuring the success of the Pacific Australia Labour Mobility scheme. The amendments seek to increase Australia’s attractiveness as a destination of choice for foreign resident workers and importantly, support development and strategic objectives in the Pacific by ensuring that workers pay tax at a concessional rate on their earnings in Australia.

Income tax rates applying to resident workers for Australian tax purposes

4.9              Individuals who are residents of Australia for tax purposes pay ordinary resident tax rates on their taxable income, which includes access to the tax-free threshold.

4.10          Longer-term workers under the Pacific Australia Labour Mobility scheme who qualify as residents for tax purposes will pay ordinary resident tax rates on their taxable income.

Comparison of key features of new law and current law

Table 4.1 Comparison of new law and current law

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

New law

Current law

With effect from the 2022-23 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 2022-23 and 2023-24 income years, the lowest marginal tax rate starting at 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 starting at 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

4.11          Schedule 4 to the Bill 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 July 2022.

4.12          The final withholding tax is re-named from the ‘Seasonal Labour Mobility Program withholding tax’ to the ‘labour mobility program withholding tax’ and references to ‘Seasonal Labour Mobility Program’ are replaced with references to ‘labour mobility programs’, to reflect its broader scope. [Schedule 4, items 20 and 21, section 995-1 of the ITAA 1997]

4.13          In extending the final withholding tax to the Pacific Australia Labour Mobility scheme, 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

4.14          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

4.15          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. This ensures that Approved Employers withhold the correct amounts from payments to employees. [Schedule 4, item 26, paragraph 12‑319A(a) in Schedule 1 to the TAA 1953]

4.16          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 4, items 5 and 6, section 26-25A of the ITAA 1997]

Liability for final withholding tax and discharging the liability

4.17          Employees paid amounts subject to the final withholding tax are liable for the tax. [Schedule 4, item 10, section 840-905 of the ITAA 1997]

4.18          However, the employee is entitled to a credit equal to the amount of withholding tax withheld by their employer. [Schedule 4, item 33, section 18‑33 in Schedule 1 to the TAA 1953]

4.19          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.

4.20          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 4, item 19, section 840-920 of the ITAA 1997]

Amounts subject to final withholding tax

4.21          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 4, item 10, section 840-905 of the ITAA 1997]

4.22          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 4, item 17, section 840-915 of the ITAA 1997]

Other administrative arrangements and settings

4.23          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 4, items 15 and 16, section 840‑910 of the ITAA 1997]

4.24          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 4, item 16, section 840‑910 of the ITAA 1997]

Allowing tax arrangements to be updated by regulations

4.25          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 4, items 11, 13 and 27, paragraphs 840-905(b) and 840‑906(c) of the ITAA 1997 and subparagraph 12-319A(b)(iii) in Schedule 1 to the TAA 1953]

4.26          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.

4.27          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 does not apply

4.28          Under these tax arrangements, benefits provided to foreign resident workers are not subject to fringe benefits tax. 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, non-exempt income.  

Superannuation arrangements

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

4.30          When leaving Australia, workers may be eligible to claim this superannuation back as a departing Australia superannuation payment, net of any applicable withholding tax.

Consequential amendments

4.31          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 be expanded. [Schedule 4, items 1 to 4, 7 to 9, 12, 14, 18, 22 to 25, 28 to 32, and 34 to 37, section 170(10AA) of the Income Tax Assessment Act 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]

4.32          The final 15 per cent withholding tax applies to ‘covered labour mobility programs’. From 1 July 2022, ‘covered labour mobility programs’ includes:

·                     the Seasonal Labour Mobility Program;

·                                 the Pacific Australia Labour Mobility scheme; and

·                     each program (if any) prescribed by the regulations.

Commencement, application, and transitional provisions

4.33          The Income Tax Amendment (Labour Mobility Program) Act 2022 commences on 1 July 2022. The amendments in Schedule 4 to the Bill commence at the same time but do not commence at all if the Income Tax Amendment (Labour Mobility Program) Act 2022 does not commence[Section 2 of the Income Tax Amendment (Labour Mobility Program) Bill 2022; section 2 to the Bill]

4.34          The final withholding tax of 15 per cent applies in relation to salary, wages, commission, bonuses or allowances paid to an employee on or after 1 July 2022. [Schedule 4, item 38]

4.35          These amendments apply retrospectively in relation to amounts paid prior to commencement. Although the amendments apply retrospectively in this way, the changes are wholly beneficial to or do not disadvantage anyone affected by the amendments.

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

4.37          Similarly, retrospectively changing withholding obligations for employers of such workers does not disadvantage employers, as they would otherwise have been required to withhold at foreign resident rates (starting at 32.5 per cent). If an employer withheld at marginal rates starting at 32.5 per cent, they would have met the lesser obligation of withholding at 15 per cent.


Table of Contents:

Outline of chapter 33

Context of amendments. 33

Summary of new law.. 34

Detailed explanation of new law.. 35

Faith-based status determined by APRA.. 35

Trustees may apply for faith-based status. 36

Ongoing faith-based status. 38

Trustees must inform APRA of new information.. 38

APRA may revoke faith-based status. 38

Supplementary test for faith-based products. 39

Commencement, application, and transitional provisions. 40

 

Outline of chapter

5.1              Schedule 5 to the Bill amends the SIS Act to provide for a supplementary annual performance test for faith-based products. APRA may determine that a product is a faith-based product if a trustee for the product provides APRA with a valid application. Faith-based products pass the annual performance test if they pass the original or the supplementary performance test.

Context of amendments

5.2              The Your Future, Your Super reforms were a package of superannuation laws introduced in 2021 in response to recommendations of the Productivity Commission’s report, Superannuation: Assessing Efficiency and Competitiveness.

5.3              Consistent with recommendation 4, Schedule 2 to the Treasury Laws Amendment (Your Future, Your Super) Act 2021 and supporting regulations established an annual superannuation performance test to hold superannuation trustees to account for product underperformance. The performance test measures investment performance (including investment fees and taxes) and administration fees for individual products.

5.4              APRA is required to conduct the annual performance test every year, determining a superannuation product’s performance against a benchmark. Products which fall short of the benchmark by more than 0.5 percentage points a year, on average, over a rolling eight-year period, fail the performance test and the trustee must notify the product’s beneficiaries by a standard letter as prescribed by the regulations. Products that fail the performance test in two consecutive years are prohibited from accepting new beneficiaries until they pass the performance test again.

5.5              In December 2021, the Government announced that, if elected, it would adjust the performance test to take into account the religious affiliation of a superannuation fund when applying the annual performance test.

5.6              A supplementary performance test for faith-based products allows investment in accordance with faith-based principles to be taken into account when assessing the performance of a product against benchmarks.

Summary of new law

5.7              Schedule 5 to the Bill amends the SIS Act to provide for a supplementary annual performance test for faith-based products.

5.8              APRA may determine that a product is a faith-based product if a trustee provides APRA with a valid application. In order to be a valid, an application must be in writing and in the approved form, and must contain:

·                     certification from the trustee(s) that the product uses a faith-based investment strategy and that this has been disclosed in a document required to be given to each beneficiary holding the product in the financial year under the Corporations Act or the SIS Act and is, and in the future will be, disclosed in the funds marketing materials;

·                     one or more indices which APRA could use to assess the product’s performance; and

·                     any other information prescribed by the regulations or legislative instrument.

5.9              If a faith-based product fails the original performance test, APRA must assess the product against the supplementary performance test. The trustee of the faith-based product only experiences the consequences of a failed performance test if it fails the supplementary performance test. Faith-based products that pass the original performance test are not subjected to the supplementary test.

5.10          Trustees must apply to APRA between 1 February of the prior financial year and 31 January of the financial year for APRA to determine a product as having faith‑based status for that financial year.

5.11          Trustees of a faith-based product have an ongoing obligation to notify APRA of any new information which may impact a product’s faith-based status. APRA may revoke a determination that a product is a faith-based product in certain circumstances. A product will continue to be a faith-based product until APRA revokes the determination.

Detailed explanation of new law

5.12          The supplementary performance test will be implemented as part of the existing performance test framework as set out in Part 6A of the SIS Act.

5.13          Under the existing framework, APRA must run the performance test for all Part 6A products. A ‘Part 6A product’ is defined in section 60B to mean MySuper products and other products to be specified in the SIS Regulations. APRA makes a determination of the performance test results by 31 August of that financial year. A product either meets the requirement for assessment under section 60D (that is, it passes the performance test) or does not meet the requirement for assessment (that is, it fails the performance test).

Faith-based status determined by APRA

5.14          A product is a faith-based product if it is a Part 6A product which APRA has determined to be a faith-based product. A new definition of ‘faith-based product’ in relation to a financial year is inserted into the definitions section of the SIS Act.
[Schedule 5, items 1 and 2, subsection 10(1) and section 60K of the SIS Act].

5.15          APRA may determine that a product is a faith-based product for a financial year if a trustee provides APRA with a valid application between 1 February of the prior financial year and 31 January of the relevant financial year.
[Schedule 5, item 2, section 60L of the SIS Act]

5.16          APRA’s decision whether or not to determine a product is a faith-based product will not be a ‘reviewable decision’ within the meaning of the SIS Act. The omission of merits review is in accordance with the Administrative Review Council’s guide, What decisions should be subject to merits review?, which states that decisions that automatically follow from the happening of certain circumstances are unsuitable for merits review. APRA’s decision is an automatic decision, following from the submission of an application that contains the required information. The requirements for the faith-based status determination are clearly specified in the SIS Act (and will be further specified in the regulations) and the determination is based on whether certain information, already available to trustees, is provided to APRA or not. Upon the occurrence of a valid application, there is nothing on which merits review can operate.

5.17          APRA will engage with the applicant trustee(s) on the information provided during the period between the application being submitted and 31 March.

Trustees may apply for faith-based status

5.18          Trustees may apply, in writing and in the approved form, for APRA to determine that a product is a faith-based product.
[Schedule 5, item 2, subsection 60L(1) and paragraph 60L(2)(a) of the SIS Act]

5.19          In order to be a valid application, an application must contain:

·                     a declaration from the trustee(s) that the product’s investment strategy accords with faith-based principles;

·                     a declaration from the trustee/trustees that they have:

                    disclosed their faith-based investment strategy to members of the product in a document required to be given to each beneficiary of the fund that holds the product in the financial year under the Corporations Act or the SIS Act; and

                    disclosed and in the future disclose their faith-based strategy in marketing materials;

·                     one or more indices which APRA could use to assess the product’s performance; and

·                     any other information prescribed by the regulations or a legislative instrument.

[Schedule 5, item 2, subsections 60L(2) to (3) of the SIS Act]

5.20          Trustees must certify that the faith-based investment strategy has been disclosed in a document required to be given to each beneficiary that holds the product under the SIS Act and the Corporations Act and in marketing materials so that current and prospective beneficiaries of the product can be aware of the faith-based investment strategy. Trustees do not need to prove or certify that every member has agreed to the faith-based investment strategy.

5.21          The index or indices which trustees provide should reflect the faith-based nature of the investment strategy and will be alternative to the assumed indices used for the original test (set out at regulation 9AB.17 of the SIS Regulations).

Regulations may prescribe application requirements

5.22          Regulations may specify information which trustees must include in the application. Regulations may specify this required information by reference to information specified in a legislative instrument, and regulations may empower APRA to make a legislative instrument for the purposes of specifying information.
[Schedule 5, item 2, paragraph 60L(2)(d) and subsection 60L(3) of the SIS Act]

5.23          For example, the regulations may provide that an application must contain:

·                     the trustee’s investment strategy, which includes the product’s faith‑based principles;

·                     the product’s Product Disclosure Statement;

·                     a copy of any advertising materials disclosing the product’s faith-based investment strategy; and

·                     the time at which the product adopted its faith-based investment strategy.

5.24          This regulation-making power reduces the complexity of the SIS Act by removing the administrative and technical matters from the primary law and unfolding that detail in a lower level of legislation. This accords with hierarchy of laws principles and increases the readability of the SIS Act. As a consequence, this may increase the level of understanding about responsibilities and obligations and, ultimately, compliance with regulatory expectations.

Timing of application and determination

5.25          Trustees must apply between 1 February of the prior financial year and 31 January of a financial year for APRA to determine the product is a faith‑based product in respect of that financial year.
[Schedule 5, item 2, subsections 60L(4) to (5) of the SIS Act]

5.26          APRA must then decide by 31 March in the financial year whether or not to determine that the product is a faith-based product. This allows APRA sufficient time to consider faith-based status applications, engage with applicants, and subject the relevant products to both the original performance test and the supplementary performance test by the deadline for the performance test.
[Schedule 5, item 2, subsection 60L(6) of the SIS Act]

Ongoing faith-based status

5.27          If APRA has determined a product to be a faith-based product for a financial year, that product will continue to be a faith-based product in future financial years provided that APRA has not decided to revoke the determination that a product is a faith-based product.
[Schedule 5, item 2, section 60M of the SIS Act]

Trustees must inform APRA of new information

5.28          If a trustee that offers a faith-based product has information which relates to the extent to which:

·                     the product’s investment strategy accords with faith-based principles;

·                     the disclosure requirements have been complied with; or

·                     the index or indices used to assess the product’s performance align with the faith-based investment strategy,

the trustee must provide this information to APRA as soon as practicable.
[Schedule 5, item 1, subsections 60R(1) to (2) of the SIS Act]

5.29          Failure to do this is a civil penalty provision attracting a maximum penalty of 2,400 penalty units (which is equivalent to $532,8000 as of 1 July 2020). This penalty is the same as the penalty for other civil penalty provisions of the SIS Act and has the same purpose including to secure deterrence. The maximum penalty is adequate to deter and punish a worst case offence, in accordance with the Attorney-General’s Department’s A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011 edition.
[Schedule 5, item 2, subsection 60R(3) of the SIS Act and item 3, paragraph 193(ac) of the SIS Act]

APRA may revoke faith-based status

5.30          APRA may revoke a determination that a product is a faith-based product, at any time, if APRA reasonably considers that:

·                     the product’s investment strategy does not accord with faith-based principles;

·                     the disclosure requirements have not been complied with; or

·                     the trustees have failed to provide information as required by section 60R (provision of information).
[Schedule 5, item 2, section 60N of the SIS Act]

5.31          For the revocation to apply to a financial year, APRA must revoke the determination no later than 31 August in the following financial year. For example, APRA must revoke a 2023-24 determination by 31 August 2024.
[Schedule 5, item 2, subsection 60N(3) of the SIS Act]

Supplementary test for faith-based products

5.32          If a faith-based product fails the original performance test, it will be assessed against the supplementary performance test.

No consequences if a faith-based product fails only the original performance test

5.33          Under the existing Part 6A framework, if a product fails the performance test, a number of consequences will apply for APRA and trustees. These include:

·                     APRA must publish the fail result on a website maintained by APRA (see section 60C(5) of the SIS Act);

·                     trustees must notify beneficiaries of the fail result using a notification letter prescribed by regulations (see section 60E of the SIS Act); and

·                     for two consecutive fail results, trustees are prohibited from accepting new beneficiaries into the relevant product (see section 60F of the SIS Act).

5.34          If a faith-based product fails the original test, none of the above consequences will apply. The above consequences will only be triggered for faith-based products depending on the result of the supplementary test.
[Schedule 5, item 2, subsections 60P(1) to (2) of the SIS Act]

Regulations may prescribe a supplementary performance test

5.35          If a faith-based product fails the original performance test, APRA must assess it against the supplementary performance test.
[Schedule 5, item 2, subsection 60P(3) of the SIS Act]

5.36          For the original test, APRA is required to calculate a benchmark return for a product using assumed indices set out at regulation 9AB.17 of the SIS Regulations. For the supplementary test, APRA may use alternative indices for faith-based products.

5.37          Regulations may specify requirements relating to the supplementary performance test. This may include requirements relating to APRA determining appropriate indices for a faith-based product, and discretion to account for a product not having been a faith-based product for the whole period of performance history (generally corresponding to a product’s ‘lookback period’ as defined in the regulations).
[Schedule 5, item 2, section 60Q of the SIS Act]

5.38          In deciding on alternative index or indices, APRA will consider whether an alternative index or indices reflects the faith-based investment strategy. It is anticipated that APRA will consider the indices included in the application for faith-based status.  

5.39          Regulations may also specify the timing of APRA performing the supplementary test and the timing of any notifications which APRA must give trustees in relation to the original and supplementary performance tests.
[Schedule 5, item 2, subsection 60P(5) of the SIS Act]

5.40          These regulation-making powers reduce the complexity of the SIS Act by removing the administrative and technical matters from the primary law and unfolding that detail in a lower level of legislation. This accords with hierarchy of laws principles and increases the readability of the SIS Act. As a consequence, this may increase the level of understanding about responsibilities and obligations and, ultimately, compliance with regulatory expectations.

Consequences of failing the supplementary performance test

5.41          If a product fails the supplementary performance test, the consequences set out in the existing performance test framework will apply (see subsection 60C(5), and sections 60E and 60F of the SIS Act).
[Schedule 5, item 2, subsection 60P(4) of the SIS Act]

Commencement, application, and transitional provisions

5.42          Schedule 5 to the Bill commences on the day the Act receives Royal Assent.
[Clause 2]

5.43          The amendments made by Schedule 5 to the Bill apply on and after the commencement of this item.
[Schedule 5, item 4]


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

Treasury Laws Amendment (2022 Measures No. 3) Bill 2022
Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2022
Income Tax Amendment (Labour Mobility Program) Bill 2022

Table of Contents:

Foreign acquisitions and takeover penalties. 42

Overview.. 42

Human rights implications. 42

Conclusion.. 44

Data sharing to support government responses to major disasters. 45

Overview.. 45

Human rights implications. 45

Conclusion.. 47

Modification power 47

Overview.. 47

Human rights implications. 48

Conclusion.. 48

Tax treatment for new or revised visa programs. 48

Overview.. 48

Human rights implications. 48

Conclusion.. 49

Faith-based products. 49

Overview.. 49

Human rights implications. 50

Conclusion.. 50

 

Foreign acquisitions and takeover penalties

Overview

6.1              Schedule 1 to the Bill and the FATA Fees Bill 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.

6.2              The FATA provides that a foreign person must seek foreign investment approval before acquiring an interest in Australian residential land and imposes obligations on a foreign person who acquires an interest in residential land. The FATA contains specific penalties for contraventions of provisions relating only to residential land. Schedule 1 to the Bill amends the FATA to double the maximum financial penalties for contraventions of residential land provisions by foreign investors to ensure that these penalties continue to act as an effective deterrent.

6.3              A range of fees are payable by a foreign person under the FATA. The FATA Fees Bill amends the FATA Fees Act to update the fee cap amount to incorporate indexation and the dates referred to in the indexation provisions.

Human rights implications

Offences and civil penalties

6.4              Schedule 1 to the Bill doubles the financial penalties for the offence in section 88 of the FATA and contraventions of civil penalty provisions relating to residential land. To the extent the increases in financial penalties apply to bodies corporate, they do not engage any human rights.

6.5              Civil penalty provisions may engage criminal process rights under Articles 14 and 15 of the ICCPR. Although there is a domestic law distinction between criminal and civil penalties, ‘criminal’ is separately defined in international human rights law. Therefore, when a provision imposes a civil penalty, it is necessary to determine whether or not the penalty amounts to a ‘criminal’ penalty for the purposes of Articles 14 and 15 of the ICCPR.

6.6              The amended civil penalty provisions may be considered criminal for the purposes of human rights law. Although the provisions largely apply to foreign persons who should reasonably be aware of their obligations under the FATA, the size of the financial penalties are significant.

6.7              While the financial penalties for contraventions of residential land provisions in the FATA are large, the financial penalties are appropriate to deter contraventions. Those involved in committing offences under the FATA could receive large financial benefits from their misconduct or could gain control of assets that may be contrary to the national interest and difficult to reverse once established. The increase in financial penalties is appropriate to deter non-compliance, and to ensure paying a financial penalty does not become a cost of doing business. These increases to financial penalties will neutralise any financial benefits or gains obtained from contraventions of the FATA. This approach is consistent with the broader penalty framework in the FATA.

6.8              These higher financial penalties are the maximum that a court can impose. The judiciary continues to have discretion to consider the seriousness of the contravention and impose a penalty that is appropriate in the circumstances.

6.9              Although the severity of the financial penalties may be considered criminal for the purposes of human rights law, the amendments do not amend any of the criminal process or procedural rights that currently exist and are upheld in accordance with Article 14 of the ICCPR. The increased penalties will apply to offences that are committed, or continue to be committed, after the amendments commence, and therefore uphold article 15 of the ICCPR.

6.10          Accordingly, the increase to maximum financial penalties for contraventions of residential land provisions in the FATA does not engage Articles 14 or 15 of the ICCPR.

Right to be free from discrimination

6.11          Schedule 1 to the Bill and the FATA Fees Bill engage the right to equality and non-discrimination under the ICCPR and ICERD.

6.12          Article 26 of the ICCPR recognises that all persons are equal before the law and are entitled without discrimination to the equal protection of the law. Article 26 further provides that ‘the law shall prohibit any discrimination and guarantee to all persons equal and effective protection against discrimination on any ground such as…national or social origin, property, birth or other status’.

6.13          Article 2(1)(a) of the ICERD states that, ‘Each State Party undertakes to engage in no act or practice of racial discrimination against persons, groups of persons or institutions and to ensure that all public authorities and public institutions, national and local shall act in conformity with this obligation’. Under Article 5 of ICERD, States Parties undertake to prohibit and eliminate racial discrimination in the enjoyment of civil, political, economic, social and cultural rights, including the ‘right to own property alone as well as in association with others’.

6.14          Different treatment amongst individuals or groups may not constitute prohibited discrimination under the ICCPR and ICERD if the criteria for such differentiation are reasonable and objective and if the aim is to achieve a purpose which is legitimate.

6.15          Schedule 1 to the Bill and the FATA Fees Bill engage Article 26 of the ICCPR and Articles 2 and 5 of ICERD because the penalties imposed by the FATA and fee cap applied by the FATA Fees Act generally only apply to a ‘foreign person’. While an Australian citizen who is not ordinarily a resident in Australia may be a ‘foreign person’ for the purposes of the FATA, it is anticipated that the majority of individuals who are directly affected by the amendments will not be Australian citizens.

6.16          The criteria by which Schedule 1 to the Bill and the FATA Fees Bill treats people differently are reasonable and objective. The purpose of Australia’s foreign investment framework is to regulate certain kinds of foreign investment to ensure that the proposed investments are not contrary to Australia’s national interest. All foreign persons are regulated in the same manner under Australia’s foreign investment framework and the definition of foreign person is clearly set out in the FATA. The amendments rely on this established definition of foreign person in the FATA.

6.17          The purpose of Schedule 1 to the Bill is to adequately deter non-compliance of the residential property provisions in the FATA to protect Australia’s housing stock and the affordability of Australian residential property. The purpose of the FATA Fees Bill is to update the fee cap amount to clarify the current indexed amount. These amendments aim to achieve a purpose which is legitimate and there is no less restrictive way to achieving the objectives.

6.18          While Schedule 1 to the Bill and the FATA Fees Bill primarily affect foreign persons, this different treatment is reasonable, necessary and proportionate to the objectives.

Conclusion

6.19          Schedule 1 to the Bill and the FATA Fees Bill are compatible with human rights because, to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.

Data sharing to support government responses to major disasters

Overview

6.20          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.

6.21          Schedule 2 to the Bill amends subsection 355-65(8) of Schedule 1 to the TAA 1953 to include an additional purpose for which protected information can be disclosed, and to whom.

6.22          A taxation officer will be permitted to disclose protected information to an Australian government agency for the purposes of administering a program that is declared to be a major disaster support program by the Minister.

6.23          Protected information is information disclosed or obtained under a taxation law as defined in section 355-30 of the TAA 1953. An ‘Australian government agency’ is the Commonwealth or a State or Territory (or a Commonwealth, State or Territory authority) as defined in section 995-1(1) of the ITAA 1997.

6.24          The disclosure of protected information ensures that Australian government agencies can address the needs of individuals and businesses significantly disrupted by a major disaster event more efficiently and effectively and reduces the risk of those individuals and businesses receiving inadequate or inappropriate support.

Human rights implications

6.25          The amendments made by Schedule 2 to the Bill engage:

·                     the right to be presumed innocent until proven guilty according to the law in Article 14(2) of the ICCPR;  and

·                     the prohibition on arbitrary or unlawful interference with privacy contained in Article 17 of the ICCPR.

Article 14(2) of the ICCPR

6.26          Article 14(2) of the ICCPR protects the right to be presumed innocent until proven guilty according to law. The amendments made by Schedule 2 engage Article 14(2) of the ICCPR as the amendments provide for an exception to the prohibition of a taxation officer disclosing protected information. The prohibition is a criminal offence. Subsection 13.3(3) of the Criminal Code provides that if a defendant wishes to rely on any exemption provided by the law creating an offence then they will bear an evidential burden in relation to that matter. Therefore, a taxation officer wishing to rely on the exception bears the evidential burden in relation to the matters.

6.27          Reverse burden offences will likely to be compatible with the presumption of innocence where they are reasonable, necessary and proportionate in pursuit of a legitimate objective. It is reasonable and necessary that the evidential burden be reversed in this situation as matters relating to the disclosure and for which purposes (such as what information is being disclosed and for what purpose the disclosure is made) are peculiarly within the knowledge of the person making the disclosure as the defendant is the only person who will be aware of to whom the information has been disclosed or that it was disclosed in reliance of the exception. It would also be significantly more difficult and costly for the prosecution to disprove these facts.

Article 17 of the ICCPR

6.28          Article 17 of the ICCPR prohibits arbitrary or unlawful interference with an individual’s privacy, family, home or correspondence. The right to privacy includes respect for informational privacy, including in respect of storing, using and sharing personal information and the right to control the dissemination of this information.

6.29          The amendments made by Schedule 2 to the Bill are compatible with Article 17 of the ICCPR as its engagement will be neither unlawful nor arbitrary.

6.30          The right in Article 17 may be subject to permissible limitations, where these limitations are authorised by law and are not arbitrary. In order for an interference with the right to privacy to be permissible, the interference must:

·                     be authorised by law;

·                     be for a reason consistent with the ICCPR; and

·                     be reasonable in the particular circumstances.

6.31          The United Nations Human Rights Committee has interpreted the requirement of ‘reasonableness’ to imply that any interference with privacy must be proportional to the end sought and be necessary in the circumstances of any given case.

6.32          The amendments are not arbitrary as they are aimed at a legitimate objective and are reasonable and proportionate in achieving that objective.

6.33          A major disaster event requires quick, efficient and effective responses to deal with its impacts. The amendments will enable the government to appropriately respond to the impacts of events that cause death or injury to a large number of individuals or widespread damage to property or the natural environment.

6.34          The amendments are reasonable and proportionate in achieving this objective and are sufficiently circumscribed so as not to constitute an arbitrary interference with the right to privacy, particularly noting that:

·                     the disclosure is limited to protected information that is for the purpose of administering a declared major disaster support program; and

·                     a major disaster support program must be declared by legislative authority and must satisfy certain criteria; and

·                     the period in which protection information may be recorded or disclosed is for a maximum of two years.

Conclusion

6.35          Schedule 2 to the Bill is compatible with human rights as it does not limit any applicable human rights or freedoms.

Modification power

6.36          Schedule 3 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

6.37          Schedule 5 to the Coronavirus (Measures No. 2) Act is a general
instrument-making power that enables responsible Ministers to make a determination adjusting arrangements for meeting information and documentary requirements under Commonwealth legislation in response to COVID-19. This mechanism has been included in Schedule 5 to the Coronavirus (Measures No. 2) Act as a temporary measure terminating at the end of 31 December 2022.

6.38          In light of the ongoing nature of COVID-19 both in Australia and globally and its effects on the ability of individuals to move freely, the power to amend arrangements for meeting information and documentary requirements remains necessary.

6.39          Schedule 3 to the Bill amends Schedule 5 to the Coronavirus (Measures
No. 2) Act to:

·         extend the temporary mechanism for responsible Ministers to make a determination until the end of 31 December 2023; and

·         provide that determinations made by a responsible Minister do not operate after 31 December 2023.

Human rights implications

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

6.41          Each instrument made under the power provided for in Schedule 5 to the Coronavirus (Measures No. 2) Act, amended by Schedule 3 to the Bill, will be disallowable and will include a human rights compatibility statement assessing the impact of the instrument on human rights and freedoms.

Conclusion

6.42          Schedule 3 to the Bill is compatible with human rights as it does not raise any human rights issues.

Tax treatment for new or revised visa programs

Overview

6.43          Schedule 4 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.

6.44          Schedule 4 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 make amendments to reduce the tax rate on certain
income earned by foreign resident workers participating in the Pacific Australia Labour Mobility scheme from marginal rates starting at
32.5 per cent to a flat 15 per cent.

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

Human rights implications

6.46          Schedule 4 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 do not engage any of the applicable rights or freedoms.

Conclusion

6.47          Schedule 4 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.

Faith-based products

Overview

6.48          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.

6.49          The SIS Act provides for an annual superannuation performance test to hold superannuation trustees to account for product underperformance. The performance test measures investment performance (including investment fees and taxes) and administration fees for individual products. APRA is required to conduct the annual performance test every year, determining a superannuation product’s performance against a benchmark.

6.50          Schedule 5 to the Bill amends Part 9AB to the SIS Act to provide for a supplementary annual performance test for faith-based products.

6.51          APRA may determine that a product is a faith-based product if a trustee provides APRA with a valid application.

6.52          In order to be a valid application, an application must contain:

·                     a declaration from the trustee(s) that the product’s investment strategy accords with faith-based principles;

·                     a declaration from the trustee(s) that they have:

                    disclosed their faith-based investment strategy in a document required to be given under the SIS Act or Corporations Act to each beneficiary that holds the product in the financial year; and

                    disclosed and will in future disclose their faith-based strategy in marketing materials;

·                     one or more indices which APRA could use to assess the product’s performance; and

·                     any other information prescribed by the regulations or a legislative instrument.

6.53          If a faith-based product fails the original performance test, APRA must assess the product against the supplementary performance test. The trustee of the faith-based product only experiences the consequences of a failed performance test if it fails the supplementary performance test. Faith-based products that pass the original performance test are not subjected to the supplementary test.

Human rights implications

6.54          Schedule 5 to the Bill engages the right to freedom of thought, conscience and religion under Article 18 of the ICCPR.

6.55          The right to freedom of thought, conscience and religion obliges Australia to refrain from impairing a person's freedom to have or adopt a religion or belief of their own choice, and a person’s freedom to manifest their religion or belief in worship, observance, practice and teaching.

6.56          Schedule 5 to the Bill promotes the right to freedom of thought, conscience and religion in Australia by supporting individuals’ ability to choose a superannuation product which accords with their religious beliefs. This is achieved by taking into account an eligible product’s faith-based investment strategy when assessing its performance against benchmarks.

Conclusion

6.57          Schedule 5 to the Bill is compatible with human rights because it promotes the right to freedom of thought, conscience and religion