Explanatory Memorandum
(Circulated by authority of the Minister for Revenue and Financial Services, Minister for Women and Minister Assisting the Prime Minister for the Public Service, the Hon Kelly O'Dwyer MP)Chapter 10 Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Schedule 1 - Directions and penalties in relation to superannuation guarantee charge
10.1 Schedule 1 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
10.2 This Schedule allows the Commissioner to issue directions to an employer who fails to comply with their superannuation guarantee obligations. These directions can require an employer to pay an outstanding superannuation guarantee charge liability or to attend an approved education course. A failure to comply with a direction can result in criminal sanctions applying.
Education directions
10.3 For educations directions, a failure to comply with the direction is added to the existing list of tax obligations contained in section 8C of the TAA.
10.4 A contravention of these obligations is an offence of absolute liability that is subject to different penalties for first, second, and third or subsequent offences. A person who commits a first offence is liable to a fine of up to 20 penalty units, is liable to a fine of up to 40 penalty units for a second offence, and is liable to a fine of up to 50 penalty units and/or imprisonment of 12 months for a third or subsequent offence.
10.5 Extending the existing offence of absolute liability and the tiered penalties to failures to comply with an education direction is appropriate as it maintains consistency with the other failures that are already covered by section 8C. All of the circumstances relate to requirements that are imposed under the taxation law to take particular actions and a failure to comply with an education direction is directly comparable to the existing requirements to notify the Commissioner of particular matters or attend before the Commissioner or another person.
10.6 The existing defence for being unable to comply with a requirement also applies to failures to comply with an education direction, meaning that an employer who is genuinely incapable of complying with the direction will not commit an offence.
Direction to pay
10.7 For directions to pay, a failure to comply with the direction is an offence of strict liability that is subject to a maximum penalty of 50 penalty units, imprisonment for 12 months, or both.
10.8 While these consequences are specifically provided for in the rules that establish the direction, they are consistent with the existing offences that apply for other failures to comply with taxation obligations (such as the offences for contraventions of section 8C described above).
10.9 If the liability that is identified in a direction is not discharged within the required period, the employer that was issued with the direction will not commit an offence if they took all reasonable steps within the required period to both comply with the direction and to ensure that the original liability was discharged before the direction was given.
10.10 This defence operates in conjunction with the general defence of honest and reasonable mistake and ensures that employers are not subject to criminal charges for failing to comply with a direction to pay an outstanding liability where they are genuinely unable to do so.
Human rights implications
10.11 This Schedule does not engage in any of the applicable rights or freedoms.
Conclusion
10.12 Schedule 1 is compatible with human rights as it does not raise any human rights issues.
Schedule 2 - Disclosure of information about non-compliance
10.13 Schedule 2 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
10.14 This Schedule provides the Commissioner with the ability to disclose information that relates to a failure or a suspected failure by an individual's employer or former employer to comply with their superannuation obligations. Such disclosures by the Commissioner cannot include information that relates to the general affairs of the employer.
10.15 In many cases the employer will not be an individual (for example, they may be a company). However, in cases where the employer is an individual, the disclosure of information relating to a failure to comply with a superannuation obligation to an affected employee is justified on the basis that it relates to the employee's entitlements.
Human rights implications
10.16 This Schedule does not engage in any of the applicable rights or freedoms.
Conclusion
10.17 Schedule 2 is compatible with human rights as it does not raise any human rights issues.
Schedule 3 - Single touch payroll reporting
10.18 Schedule 3 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
10.19 This Schedule requires all employers to report under the Single Touch Payroll rules and report salary sacrificed amounts to the Commissioner.
Human rights implications
10.20 This Schedule does not engage in any of the applicable rights or freedoms.
Conclusion
10.21 Schedule 3 is compatible with human rights as it does not raise any human rights issues.
Schedule 4 - Fund reporting
10.22 Schedule 4 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
10.23 This Schedule does the following:
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- amends the law to allow the Commissioner to provide superannuation providers with a grace period for correcting false or misleading statements in relation to member information statements without giving rise to penalties.
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- removes the requirement for employers to report superannuation guarantee contributions paid to superannuation providers under the Single Touch Payroll reporting rules.
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- re-introduces a previous measure to remove the requirement for superannuation funds to lodge bi-annual statements for lost members.
Human rights implications
10.24 This Schedule does not engage in any of the applicable rights or freedoms.
Conclusion
10.25 Schedule 4 is compatible with human rights as it does not raise any human rights issues.
Schedule 5 - Compliance measures
10.26 Schedule 5 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
10.27 This Schedule enhances compliance with superannuation guarantee charge and other tax related liabilities. The amendments achieve this in the following ways:
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- Strengthening the integrity of the director penalty provisions for directors who fail to comply with their superannuation guarantee charge and PAYG withholding obligations; and
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- Enhancing compliance with the requirement to provide security through the use of Court orders.
10.28 An entity who fails to comply with the order commits an offence and is liable to a penalty of 50 penalty units or imprisonment for 12 months, or both. This offence is an offence of strict liability.
10.29 This applicable penalty ensures that appropriate consequences apply to entities that refuse to comply with an order that has been made against them by the Court. The amount of the penalty and the application of strict liability is the same as the offence for refusing to comply with other Court orders and the associated penalty that are already imposed under sections 8G and 8H of the TAA. Applying the same consequences in respect of security deposits ensures a consistent outcome between the two sets of rules and is appropriate as they both deal with failures to comply with Court orders.
10.30 An entity does not commit an offence to the extent they are not capable of complying with the order. This defence is consistent with the defence set out in section 8H. The defence covers situations where an entity has entered into voluntary administration or insolvency. This defence ensures that an entity will not commit an offence where an entity no longer controls or manages the business and the business assets and are not capable of complying with the order.
Human rights implications
10.31 This Schedule does not engage in any of the applicable rights or freedoms.
Conclusion
10.32 Schedule 5 is compatible with human rights as it does not raise any human rights issues.
Schedule 6 - Amendments relating to employee commencement
10.33 Schedule 6 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
10.34 This Schedule contains amendments to allow the pre-filling of an individual's tax file number declaration and superannuation standard choice form by the Commissioner to the individual's employer.
10.35 Although the information that can be pre-filled relates to an individual employee, such pre-filling can only occur at the request of the employee.
Human rights implications
10.36 This Schedule does not engage in any of the applicable rights or freedoms.
Conclusion
10.37 Schedule 6 is compatible with human rights as it does not raise any human rights issues.
Schedule 7 - Information sharing
10.38 Schedule 7 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
10.39 This Schedule contains amendments to enable the sharing and verification of TFNs which have been obtained in accordance with a Commonwealth law, between the Commissioner and Commonwealth Agencies.
10.40 The amendments are designed to provide a clear and uniform system to enable the verification and sharing of TFNs to improve on the existing gaps and deficiencies in the existing system of TFN sharing.
10.41 The amendments will improve the integrity of the welfare system with improved data-matching, enhance stronger compliance activities being undertaken by Commonwealth Agencies and ensure greater accuracy of welfare payments.
Human rights implications
10.42 The amendments made by this Schedule engage the prohibition on arbitrary or unlawful interference with privacy contained in Article 17 of the International Covenant on Civil and Political Rights (ICCPR).
10.43 The sharing and verification of TFNs between the Commissioner and Commonwealth Agencies affect TFNs belonging to individuals. The process is restricted to Commonwealth Agencies who must have obtained the TFN in accordance with a Commonwealth law. These Commonwealth laws must first permit the Commonwealth Agency to be able to legally require or request an individual to provide their TFN or provide a TFN of another individual (such as their spouse).
10.44 This Schedule is compatible with Article 17 of the ICCPR, as its engagement with the prohibition on interference with privacy will neither be unlawful nor arbitrary. The amendments are not arbitrary as the amendments are aimed at a legitimate objective and constitute an effective and proportionate means of achieving that objective.
10.45 The Schedule's engagement with the prohibition on interference with privacy is lawful as the amendments authorise the disclosure of a TFN for the purpose of verification where certain conditions and safeguards are satisfied. This is achieved by ensuring that there must be a legal basis for a Commonwealth Agency to be able to require or request a TFN of an individual. This is a necessary requisite to be able to verify the TFN with the Commissioner.
10.46 The objectives of these amendments are to:
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- support the data-matching process for Commonwealth Agencies to identify that a TFN belongs to a particular individual;
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- improve accuracy of personal assistance payments from Commonwealth Agencies to individuals
10.47 The amendments constitute an effective and proportionate means of achieving these objectives, as the existing laws already enable the sharing and verification of TFNs between the Commissioner and Commonwealth Agencies. The amendments are clarifying the existing laws to ensure that there is uniformity and consistency across all Commonwealth Agencies for the sharing and verification of TFNs.
Conclusion
10.48 Schedule 7 is consistent with Article 17 of the ICCPR on the basis that its engagement of the prohibition on interference with privacy will neither be unlawful nor arbitrary. To this extent, the Schedule complies with the provisions, aims and objectives of the ICCPR.
Schedule 8 - Miscellaneous amendments
10.49 Schedule 8 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
10.50 Schedule 8 to this Bill makes a number of miscellaneous amendments to the taxation, superannuation and other laws. These amendments are part of the Government's commitment to the care and maintenance of Treasury portfolio legislation including the taxation and superannuation systems.
10.51 In particular, this Schedule rewrites provisions regarding offshore information notices from the ITAA 1936 into the TAA and applies those provisions to all tax-related liabilities.
10.52 This Schedule also includes amendments to allow Superannuation Complaints Tribunal members or staff of the Australian Securities and Investments Commission to disclose information acquired in connection with a complaint made to the Superannuation Complaints Tribunal to the operator of AFCA to assist AFCA to perform its functions or exercise its powers.
Human rights implications
Offshore information notices
10.53 To the extent that Schedule 8 to this Bill merely rewrites existing provisions, it has no human rights implications. Therefore, this statement will only address the human rights implications of the minor changes to the offshore information notice regime, namely:
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- the application of the provisions to all tax-related liabilities, rather than merely income tax and PRRT;
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- the inadmissibility of requested information or documents the taxpayer has refused or failed to provide in proceedings under Part IVC of the TAA disputing any tax-related liability, not merely the specific tax-related liability for which the request was initially issued; and
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- the broadening of the Commissioner's considerations, in deciding whether to consent to information or documents being admitted into evidence when the taxpayer refused to provide them when requested, to consideration of whether the absence of the information or documents would make the remaining information or documents relevant to the proceeding misleading, not merely the remaining information or documents relevant to the issue.
10.54 The Commissioner may require information or documents from overseas taxpayers to ensure that the Australian tax liability of those taxpayers is correctly assessed. For domestic taxpayers, this information can be gathered under the general information-gathering powers in Subdivision 353-A in Schedule 1 to the TAA.
10.55 However, the Commissioner's ability to enforce these powers against overseas taxpayers is limited. The existing offshore information notice regime for income tax and PRRT has helped overcome these difficulties by affecting admissibility of the information or documents rather than only creating an Australian-based offence for failure to provide them.
10.56 The changes to the offshore information notice regime engage the right to a fair trial or hearing, as the evidentiary consequences of a failure or refusal to comply with a request regulate the rules of evidence in courts or tribunals.
10.57 The right to a fair trial or hearing is protected by Article 14 of the International Covenant on Civil and Political Rights. The right applies to both criminal and civil proceedings and to cases before both courts and tribunals.
10.58 One component of this right is that all parties to a proceeding must have a reasonable opportunity of presenting their case under conditions that do not disadvantage them as against other parties to the proceedings.
10.59 The rewritten provisions are a modification of the existing evidentiary consequences, rather than the creation of new evidentiary consequences. Therefore, the impact of these changes is expected to be minor.
10.60 Limitations on the right to a fair trial or hearing by the offshore information notice provisions must be reasonable, necessary and proportionate, and in pursuit of a legitimate objective.
10.61 There are different rules for limiting the right to a public hearing that do not apply in this circumstance.
10.62 The evidentiary consequences are necessary for achieving the legitimate objective of ensuring that all taxpayers are accurately assessed on their Australian tax liability. Without potential consequences of some kind, there is little incentive for a taxpayer or third party located overseas to comply with an offshore information notice. A criminal penalty, as accompanies the general information-gathering power, would be difficult to enforce against taxpayers or third parties located overseas.
10.63 The increasing application of other Australian taxes to overseas taxpayers (such as the application of GST to digital products purchased from overseas), as well as the ease with which electronic records can be transferred overseas, means that the offshore information notice regime needs to be expanded to ensure the Commissioner can correctly assess Australian tax liabilities.
10.64 The evidentiary consequences are proportionate as they only attach to requests for information or documents with which documents the taxpayer has refused or failed to comply and does not prevent the taxpayer relying on information or documents they have provided when requested.
10.65 The evidentiary consequences are also reasonable. If the taxpayer has failed or refused to provide information or documents so as to allow the Commissioner to accurately understand the dealings in issue, then it is reasonable that the taxpayer should not be able to rely on the same information or documents to dispute any resulting assessment.
10.66 Further, the evidentiary consequences are qualified. The Commissioner has a power to consent to the admissibility of information or documents. In exercising this power, the Commissioner must take into account certain matters, such as whether the absence of certain information or documents would cause the remaining information or documents in the proceeding to be misleading. This consideration is now broader in scope, and this benefits the taxpayer by ensuring that the absence of information or documents related to one issue does not disadvantage the taxpayer in relation to the other issues in a proceeding.
10.67 In addition, the Commissioner is required to consent where a refusal to consent would make any tax or penalty incontestable.
10.68 The United Nations Human Rights Committee General Comment No. 32 also provides that distinctions between the procedural rights of the parties must be based on law and justified on objective and reasonable grounds, not entailing actual disadvantage or other unfairness to the defendant. The amendments meet these conditions because the potential inadmissibility of evidence under these changes is based on law, is justified on objective and reasonable grounds as outlined above, and is entirely avoidable by the taxpayer providing the relevant information or documents to the Commissioner on request and as required under law.
Transitional arrangements relating to the Australian Financial Complaints Authority
10.69 Certain amendments made by Schedule 8 to this Bill engage the prohibition on arbitrary or unlawful interference with privacy contained in Article 17 of the International Covenant on Civil and Political Rights (ICCPR).
10.70 The Schedule contains amendments that allow Superannuation Complaints Tribunal members or staff of the Australian Securities and Investments Commission who are made available to the Superannuation Complaints Tribunal to disclose information acquired in connection with a complaint made to the Superannuation Complaints Tribunal to the operator of AFCA to assist AFCA to perform its functions or exercise its powers.
10.71 This Schedule is compatible with Article 17 of the ICCPR, as its engagement with the prohibition on interference with privacy will neither be unlawful (including by virtue of the amendments to the Superannuation (Resolution of Complaints) Act 1993 set out in the Schedule) nor arbitrary. The amendments are not arbitrary as the amendments are aimed at a legitimate objective and constitute an effective and proportionate means of achieving that objective.
10.72 The United Nations Human Rights Committee has stated, in their General Comment Number 16, that:
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- 'unlawful means that no interference can take place except in cases envisaged by the law. Interference authorized by States can only take place on the basis of law, which must itself comply with the provisions, aims and objectives of the Covenant [the ICCPR]'; and
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- 'the concept of arbitrariness is intended to guarantee that even interference provided for by law should be in accordance with the provisions, aims and objectives of the Covenant and should be, in any event, reasonable in the particular circumstances'.
10.73 The Schedule's engagement with the prohibition on interference with privacy is lawful as the amendments authorise the relevant disclosures of information.
10.74 The objectives of these amendments are to facilitate a smooth transition to the new external dispute resolution framework by allowing the Superannuation Complaints Tribunal to disclose information acquired in connection with a superannuation complaint to the operator of AFCA for the purpose of assisting AFCA to perform its functions or exercise its powers.
10.75 The functions of AFCA involve providing a complaints mechanism for persons dissatisfied with financial firms and resolving complaints against financial firms, including by making determinations. AFCA has specific powers to facilitate the resolution of superannuation complaints. This includes a power to join persons to a superannuation complaint, a power to obtain information and documents about a superannuation complaint, and a power to require people to attend a conciliation conference about a superannuation complaint.
10.76 The amendments constitute an effective and proportionate means of achieving these objectives, as the disclosures permitted by the amendments are limited to this purpose.
Conclusion
10.77 The rewritten offshore information notice provisions do, to a minor extent, limit the rights of the taxpayer to a fair trial or hearing. However, the limitation is reasonable, necessary and proportionate, and in pursuit of a legitimate objective.
10.78 This Schedule is consistent with Article 17 of the ICCPR on the basis that its engagement of the prohibition on interference with privacy will neither be unlawful (including by virtue of the amendments to Superannuation (Resolution of Complaints) Act 1993 set out in the Schedule) nor arbitrary. To this extent, the Schedule complies with the provisions, aims and objectives of the ICCPR.
Schedule 9 - Deductible Gift Recipients
10.79 Schedule 9 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
10.80 This Schedule amends the ITAA 1997 to update the list of specifically listed DGRs to include Australian Philanthropic Services Limited, Foundation 1901 Limited and Sydney Chevra Kadisha.
Human rights implications
10.81 This Schedule does not engage any of the applicable rights or freedoms.
Conclusion
10.82 This Schedule is compatible with human rights as it does not raise any human rights issues.