House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Housing and Assistant Treasurer the Hon Michael Sukkar MP)

Chapter 7 - Statement of Compatibility with Human Rights

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

Schedule 1 - Hybrid mismatch rules

7.1 This Schedule 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

7.2 Schedule 1 to the Bill amends the hybrid mismatch rules in the ITAA 1997 to:

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clarify the operation of the hybrid mismatch rules for trusts and partnerships;

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clarify the circumstances in which an entity is a deducting hybrid;

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clarify the operation of the dual inclusion income rule;

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clarify the operation of provisions that refer to corresponding foreign hybrid mismatch rules;

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clarify that, for the purpose of applying the hybrid mismatch rules, foreign income tax generally does not include foreign municipal or State taxes;

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clarify that the hybrid mismatch rules apply to MEC groups in the same way as they apply to consolidated groups;

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ensure that the hybrid mismatch integrity rule can apply appropriately to financing arrangements that have been designed to circumvent the operation of the hybrid mismatch rules; and

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where distributions made on Additional Tier 1 capital instruments give rise to a foreign income tax deduction:

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allow franking benefits on those distributions; and

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include an amount equal to the amount of the deduction in the assessable income of the entity that makes the distribution.

Human rights implications

7.3 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

7.4 This Schedule is compatible with human rights as it does not raise any human rights issues.

Schedule 2 - Single touch payroll reporting - child support information

7.5 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

7.6 Schedule 2 allows employers who report under the Single Touch Payroll rules to voluntarily report child support deductions and child support garnishee amounts deducted from salary or wages to the Commissioner of Taxation.

7.7 Schedule 2 also broadens the power of the Child Support Registrar to require the Commissioner of Taxation to provide information (including tax file numbers) of particular individuals to the Child Support Registrar, to include information that may come into the possession of the Commissioner after the requirement is made (including information that comes into existence after the requirement is made). This allows for the ongoing exchange of information between the Registrar and the Commissioner to allow for automated near real-time reporting.

Human rights implications

7.8 Schedule 2 engages the right to protection from arbitrary or unlawful interferences with privacy in Article 17 of the International Covenant on Civil and Political Rights (ICCPR) by:

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allowing certain employers to voluntarily report a range of personal information about their employees to the Commissioner of Taxation; and

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allowing the Child Support Registrar to request the Commissioner of Taxation to share personal information about particular individuals on an ongoing basis.

7.9 The amendments provide employers with the option to report child support information to the Commissioner of Taxation rather than to the Child Support Registrar. The Commissioner of Taxation will then disclose the information to the Child Support Registrar. The amendments also broaden the power of the Registrar to require the Commissioner to provide information (including tax file numbers) of particular individuals to the Registrar, to include information that may come into the possession of the Commissioner after the requirement is made (including information that comes into existence after the requirement is made). This allows for the ongoing exchange of information between the Registrar and the Commissioner to allow for automated near real-time reporting.

7.10 The right in Article 17 of the ICCPR may be subject to permissible limitations, where these limitations are authorised by law and are not arbitrary. 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. The UN 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.

7.11 The purpose of the extension to the Single Touch Payroll reporting rules are to leverage the Single Touch Payroll reporting system to:

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reduce the compliance burden on employers by removing duplicate reporting requirements and manual processes; and

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ensure more timely reporting in relation to child support deductions which are necessary to support the ongoing payment processes, monitoring, and improved accuracy of the child support payments system.

These are legitimate objectives.

7.12 The amendments give employers the option to report child support deductions and child support garnishee amounts through Single Touch Payroll reporting. Currently, employers can only report this information through manual interactions with Services Australia.

7.13 The information to be reported under these new tax rules would be limited to information employers are already required to report under child support laws. Schedule 2 does not impose any additional reporting requirements and essentially is a simplification process to allow for reporting through one system rather than two.

7.14 The streamlined reporting processes are expected to reduce the need to manually report child support information and will result in a lower administrative burden for employers. The amendments constitute an effective and proportionate means of achieving this objective as the new process simply allows information that would, under existing processes, pass directly between an employer and the Child Support Registrar, to pass through the Commissioner of Taxation.

7.15 The amendments provide an alternative method of reporting and do not affect an employer's choice to continue to report directly to the Child Support Registrar.

7.16 In electing to report under Single Touch Payroll, the child support information is treated as 'tax information', in the same manner as other tax information that is obtained by the ATO under taxation laws. Taxpayers' tax information held by the ATO is protected by strict secrecy and confidentiality rules that prohibit ATO officers from making records or disclosing this information unless a specific legislative exemption applies (see Division 355-B in Schedule 1).

7.17 Under subsection 355-65(2) in Schedule 1, ATO officers are already authorised to disclose the employer reported child support information (which is considered 'tax information') to the Child Support Registrar, as it will be for the purposes of administrating the child support laws.

7.18 The amendments also broaden the power of the Registrar to require the Commissioner to provide information (including tax file numbers) to the Registrar, to include information that may come into the possession of the Commissioner after the requirement is made (including information that comes into existence after the requirement is made). Schedule 2 does not change the type of information that may be required and essentially allows for the existing requirement to be of a standing nature to allow for automation and real-time reporting. The information provided to the Registrar is still subject to protections under existing taxation and child support secrecy laws.

7.19 The standing requirement is required for the exchange of reported child support information under the Single Touch Payroll rules between the Registrar and Commissioner. The amendments constitute an effective and proportionate means of achieving timely reporting in relation to child support deductions, which is necessary to support the ongoing payment processes, monitoring, and improved accuracy of the child support payments system. The new requirement simply allows information that would, under existing processes, pass between the Commissioner and the Registrar under repeatedly issued requests, to be exchanged on an ongoing basis under a standing request. These are legitimate objectives.

Conclusion

7.20 Schedule 2 is consistent with the right to privacy, as the collection and disclosure of information is neither arbitrary nor unlawful. To this extent, the Bill complies with the provisions, aims and objectives of the ICCPR. Schedule 2 is therefore compatible with human rights because to the extent that it may limit the right to privacy, the limitations are reasonable, necessary and proportionate.

Schedule 3 - Deductible gift recipient status for community sheds

7.21 This Schedule 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

7.22 Schedule 3 to the Bill amends the ITAA 1997 to introduce a new general category of DGR for community sheds. The new DGR category applies to public institutions that are registered charities and satisfy the definition of a community shed.

7.23 To be a community shed a public institution must:

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have the dominant purposes of advancing mental health and preventing or relieving social isolation;

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principally advance these purposes through providing a physical location at which individuals are supported to work on projects or undertake other activities in the company of others; and

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have open membership to members of the public.

7.24 The income tax law allows income tax deductions for taxpayers who make gifts of $2 or more to a DGR.

Human rights implications

7.25 This Schedule engages with the following rights and freedoms:

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the right to the highest attainable standard of physical and mental health under Article 12 of the International Covenant on Economic, Social and Cultural Rights (ICESCR); and

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the right to equality and non-discrimination under Articles 2, 16 and 26 of the International Covenant on Civil and Political Rights (ICCPR), Article 2 of the ICESCR, Articles 1, 2, 4 and 5 of the International Convention on the Elimination of All Forms of Racial Discrimination and Articles 2, 3, 4 and 15 International Convention on the Elimination of All Forms of Discrimination Against Women.

Physical and mental health

7.26 The Schedule engages the right to the highest attainable standard of physical and mental health under Article 12 of the ICESCR by providing DGR status for organisations that, among other things, have as their dominant purposes, purposes of advancing mental health and addressing social isolation.

7.27 The amendments support the realisation of the right by providing additional Government support for organisations engaged in activities that advance mental health.

Equality and non-discrimination

7.28 The Schedule also engages with the right to equality and non-discrimination under Article 26 of the ICCPR by providing that eligible entities may have membership that is open only to persons of one gender, only open to Indigenous Australians or only open to Indigenous Australians of one gender.

7.29 This engages with the right and restricts the right as it permits Government support to be provided through the tax system to organisations that have membership rules that restrict membership based on gender or Indigenous status.

7.30 However permitting this restriction in some cases is a reasonable and proportionate means of pursing the legitimate objectives of advancing mental health and addressing social isolation. For personal, social and cultural reasons, many isolated people can be best assisted through the provision of a space restricted to those of the same gender. Similarly, the special cultural position and traditions of Australia's Indigenous peoples mean that sometimes issues around mental health and social isolation can be most effectively addressed through the provision of a space shared with others from the same cultural traditions.

7.31 It should also be noted that DGR status is also available for sheds with fully open membership

Conclusion

7.32 This Schedule is compatible with human rights. While it engages with the right to equality and non-discrimination as it permit support to be provided through the tax system to community sheds with restricted membership, it does in a reasonable and proportionate way in order to advance mental health and address social isolation.

Schedule 4-Funding capital increases for the World Bank Group

7.33 Schedule 4 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

7.34 Schedule 4 to the Bill amends the IMA Act 1947 and IFC Act 1955 to facilitate Australia making additional capital contributions to the IBRD, and the IFC of the World Bank Group.

7.35 To achieve this, the amendments streamline the existing legislative processes under which Australia enters into agreements to fund capital increases to the IBRD and revise the way the existing 'Articles of Agreement' of the IFC are incorporated into the IFC Act 1955. The amendments also establish appropriations to facilitate payments that Australia is required to make under an agreement with the IBRD, under the existing Articles of Agreement of the IFC, or under a separate agreement with the IFC.

Human rights implications

7.36 Schedule 4 does not engage any of the applicable rights or freedoms.

Conclusion

7.37 Schedule 4 is compatible with human rights as it does not raise any human rights issues.

Schedule 5 - Deductible gift recipients

7.38 This Schedule 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

7.39 Schedule 5 to the Bill amends the ITAA 1997 to allow the following entities to be deductible gift recipients under the income tax law:

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Governor Phillip International Scholarship Trust;

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High Resolves;

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Australian Academy of Law;

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Superannuation Consumers' Centre Ltd;

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Motherless Daughters Australia Limited;

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The Headstone Project (Tas) Inc.;

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Foundation Broken Hill Limited;

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C E W Bean Foundation.

Human rights implications

7.40 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

7.41 This Schedule is compatible with human rights as it does not raise any human rights issues.

Schedule 6 - Tax Secrecy

7.42 Schedule 6 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

7.43 Schedule 6 to the Bill makes amendments to the tax secrecy provisions in the TAA 1953 to allow protected information relating to the JobKeeper scheme to be disclosed to the Fair Work Commission and the Fair Work Ombudsman for the purposes of the administration of the Fair Work Act 2009.

Human rights implications

7.44 The amendments made by Schedule 6 to the Bill engage:

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the right to be presumed innocent until proven guilty according to the law in Article 14(2) of the International Covenant on Civil and Political Rights; and

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the prohibition on arbitrary or unlawful interference with privacy contained in Article 17 of the International Covenant on Civil and Political Rights.

Presumption of innocence

7.45 The amendments made by Schedule 6 to the Bill engage Article 14(2) of the International Covenant on Civil and Political Rights as the amendments provide for an exception to the prohibition of a taxation officer disclosing protected information. The prohibition is a criminal offence. A taxation officer wishing to rely on the exception bears the evidential burden in relation to the matters.

7.46 It is appropriate 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 being made) are peculiarly within the knowledge of the person making the disclosure and can be raised in making their defence. It would be significantly more difficult and costly for the prosecution to disprove these facts.

Privacy

7.47 The amendments made by Schedule 6 to the Bill are compatible with Article 17 of the International Covenant on Civil and Political Rights as its engagement will neither be unlawful or arbitrary.

7.48 In order for an interference with the right to privacy to be permissible, the interference must:

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be authorised by law;

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be for a reason consistent with the International Covenant on Civil and Political Rights; and

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be reasonable in the particular circumstances.

7.49 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.

7.50 The engagement with the prohibition on the interference with privacy is lawful as the amendments authorise the disclosure of information only as it relates to the JobKeeper scheme and only for the purposes of the administration of the Fair Work Act 2009.

7.51 The amendments are not arbitrary as they are aimed at a legitimate objective, and are reasonable and proportionate in achieving that objective. The JobKeeper scheme has involved changes to arrangements under the Fair Work Act 2009, and both the Fair Work Ombudsman and the Fair Work Commission play important roles in relation to compliance and enforcement with, and dispute resolution under, the Fair Work Act 2009 including in relation to those changes. The amendments ensure that both bodies can access the information they need to undertake their important functions under the Fair Work Act 2009 in connection with the JobKeeper scheme.

7.52 The amendments are also proportionate and reasonable. The amendments are limited to information relating to the JobKeeper scheme and will cease to have effect once disputes and investigations relating to the operation of the JobKeeper scheme have concluded. The amendments are further limited to information that is relevant to the administration of the Fair Work Act 2009 (including instruments made under that Act).

Conclusion

7.53 Schedule 6 to the Bill is compatible with human rights as it does not limit any applicable human rights or freedoms.