Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon. Josh Frydenberg MP)Chapter 10: Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.<
Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022 Excise Tariff Amendment (Cost of Living Support) Bill 2022 Customs Tariff Amendment (Cost of Living Support) Bill 2022
Schedule 1 - Medicare Levy and Medicare Levy Surcharge Income Thresholds
Overview
10.1 Schedule 1 to the main 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.
10.2 Schedule 1 to the main Bill amends the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 to increase:
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- the Medicare levy low-income thresholds for individuals and families (along with the dependent child-student component of the family threshold) in line with movements in the CPI;
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- the Medicare levy low-income thresholds for individuals and families eligible for the SAPTO (along with the dependent child-student component of the family threshold), in line with movements in the CPI; and
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- the Medicare levy surcharge low-income threshold in line with movements in the CPI.
10.3 This will ensure that low-income individuals, families, seniors and pensioners who were exempt from the Medicare levy in the 2020-21 income year continue to be exempt in the 2021-22 income year if their income has increased in line with, or less than, movements in the CPI
Human rights implications
10.4 Schedule 1 to the main Bill does not engage any of the applicable rights or freedoms.
Conclusion
10.5 Schedule 1 to the main Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 2 - Deductibility of COVID-19 tests
Overview
10.6 Schedule 2 to the main 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.
10.7 Schedule 2 to the main Bill amends the ITAA 1997 by allowing an income tax deduction for taxpayers who incur relevant COVID-19 testing expenses in gaining or producing their assessable income. The deduction applies to those expenses incurred on or after 1 July 2021.
10.8 From 1 July 2021, the amendments provide individual taxpayers with a specific deduction for their loss or outgoing incurred in gaining or producing assessable income. The loss or outgoing must be incurred in respect of a COVID-19 test with the purpose of determining whether the taxpayer should attend their place of work. To qualify, the test must be one that is:
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- a polymerase chain reaction test for testing COVID-19; or
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- a test that is included in the Australian Register of Therapeutic Goods for testing COVID-19 (such as an approved rapid antigen test).
10.9 To claim the deduction under the amendments, taxpayers must meet the general substantiation requirements.
Human rights implications
10.10 Schedule 2 to the main Bill does not engage any applicable rights or freedoms.
Conclusion
10.11 Schedule 2 to the main Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 3 - Deductible gift recipients-new specific recipients
Overview
10.12 Schedule 3 to the main Bill amends the ITAA 1997 to allow the following entities to be deductible gift recipients under the income tax law:
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- Royal Humane Society of New South Wales Incorporated;
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- Perth Korean War Memorial Committee Incorporated;
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- Greek Orthodox Archdiocese of Australia Consolidated Trust Cathedral of the Annunciation of our Lady Restoration Fund;
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- The Australian Future Leaders Foundation Limited;
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- Lord Mayor's Charitable Foundation; and
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- The Ramsay Centre for Western Civilisation Limited.
Human rights implications
10.13 Schedule 3 to the main Bill does not engage any of the applicable rights or freedoms.
Conclusion
10.14 Schedule 3 to the main Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 4 - Employee share scheme
Overview
10.15 Schedule 4 to the main 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.
10.16 The Corporations Act 2001 contains a variety of rules for businesses which sell financial products and securities. These rules include a requirement to obtain an Australian financial services licence and restrictions on hawking and advertising and disclosure requirements.
10.17 Financial products and securities offered as a part of certain employee share schemes are excluded from some of these requirements under the Corporations Act 2001. Further exclusions are made in ASIC class orders CO 14/1000 and CO 14/1001. Class Order 14/1000 applies to listed bodies corporate and Class Order 14/1001 applies to unlisted bodies corporate.
10.18 An employee share scheme is an arrangement put in place by a business to reward people who contribute to the business, namely directors, employees and service providers (hereafter referred to as 'participants'), with shares or other interests in the business in exchange for their labour.
10.19 Schedule 4 to the main Bill will provide regulatory relief to allow businesses to create employee share schemes, which they would otherwise be unable to operate due to the requirements under the National Health Act 1953. If an employee share scheme receives relief under Schedule 4 to the main Bill, the standard regulatory requirements for operating a business offering shares and financial products to retail clients under the Corporations Act 2001 will not apply.
10.20 In simple terms, an employee share scheme can receive relief under Schedule 4 to the main Bill if:
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- the interests issued, sold or transferred to participants under the scheme fall within certain eligible categories of interests (for example - shares or options);
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- the participants in the scheme are directors, employees or service providers to the business; and
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- if the scheme requires payment to participate:
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- certain disclosure documents are provided with the offer;
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- if the scheme has an associated contribution plan, loan or trust, the contribution plan, loan or trust meet certain requirements;
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- the total numbers of products issued under the scheme over the previous three years does not exceed the specified percentage of the body's issued capital; and
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- for an unlisted body corporate, all participants are limited to outlay a monetary cap of $30,000 per year (which can be accrued for unexercised options over a 5-year period, up to a maximum of $150,000), plus 70 per cent of dividends and 70 per cent of cash bonuses.
10.21 If an employee share scheme does not meet the requirements for relief under Schedule 4 to the main Bill the business operating the employee share scheme will be in breach of a wide variety of provisions under the Corporations Act 2001, such as issuing shares without appropriate disclosure.
Human rights implications
Offence-specific defences
10.22 Schedule 4 to the main Bill engages the right to a fair trial in Article 14 of the ICCPR. Article 14 of the ICCPR provides that everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law.
10.23 Sections 1100ZH and 1100ZI provide that it is an offence to provide misleading or deceptive information in an ESS offer document or document provided during an exercise period, or to fail to disclose a new circumstance that arises during the offer or exercise period. It is also an offence to fail to notify a body corporate of a misleading or deceptive statement or new circumstance under section 1100ZJ.
10.24 A number of defences to these offences are available, including not knowing that a statement was misleading and deceptive, and placing reasonable reliance on information provided by another person. A person who wishes to rely on one of these exceptions bears the evidential proof of raising the defence.
10.25 Under subsection 13.3(3) of the Criminal Code Act 1995 a defendant who wishes to rely on any exception, provided by the law creating an offence, bears an evidential burden in relation to that matter; the exception need not accompany the description of the offence.
10.26 The reversal of the evidential burden is acceptable in this instance as it is peculiarly within the knowledge of the defendant themselves whether a particular defence is relevant to their case. For instance, an individual relying on the defence that they lacked knowledge that a statement was misleading would easily be able to identify that they were unaware a statement was misleading and then rely on that defence. It would be unreasonable and unnecessary use of government resources to require the regulator to prove beyond a reasonable doubt that each defence did not apply to every individual.
10.27 Accordingly, to the extent that Schedule 4 to the main Bill engages the rights under Article 14 of the ICCPR, it is compatible with human rights as the limitations are appropriate and proportionate.
Strict liability offences
10.28 Schedule 4 to the main Bill engages the right to a fair trial, as well as the presumption of innocence in Article 14 of the ICCPR. Article 14 of the ICCPR provides that everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law.
10.29 Strict liability offences engage with this right as they involve the imposition of criminal liability without a mental fault element. However, strict liability offences are compatible with the presumption of innocence if they are reasonable, necessary and proportionate and in pursuit of a legitimate objective.
10.30 Sections 1100ZE and 1100ZF provide that it is a strict liability offence to:
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- fail to hold money paid by a participant to obtain an interest under an employee share scheme on trust for the participant until the interest is sold or the money is returned to the participant;
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- fail to hold money paid by a participant in anticipation of a liquidity event on trust until the start of the liquidity period or the money is returned to the participant; and
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- fail to return the money to the participant as soon as practicable if the money needs to be returned.
10.31 Strict liability offences are appropriate in these circumstances, as it is appropriate for a person to be penalised if they permit an ESS participant's money to be dealt with improperly regardless of their intention. This is because of the power and information imbalance between businesses and ESS participants, and the potential for employees to lose a significant amount of money if they do not receive the promised ESS interest or the liquidity event does not occur. The obligation to keep money on trust is a common obligation required of businesses handling clients' money and is not particularly onerous and provides low regulatory burden.
10.32 Section 1100ZJ provides that it is an offence of strict liability for a person to fail to inform the business operating an employee share scheme if they become aware of a misleading or deceptive statement or omission in a disclosure document, if the person:
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- is a director of the relevant body corporate (or a proposed director); or
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- the person is named in the disclosure document and has provided information mentioned in the disclosure document.
10.33 A strict liability offence is appropriate in this circumstance as the information imbalance between the director or person making a statement in the disclosure document and a participant means that it is appropriate for such a person to be penalised if they permit incorrect information to be provided to participants regardless of their intention. This is because participants in an employee share scheme are reliant on the information contained in the disclosure documents and may suffer a significant detriment if the information is misleading, deceptive or incomplete.
10.34 Section 1100ZM provides that it is an offence for a person who makes or purports to make an offer of ESS interests to not provide information to ASIC upon request.
10.35 A strict liability offence is appropriate in this circumstance as it is a minimal administrative burden in order to access a regime which provides significant regulatory relief, and so it is appropriate for a person to be penalised for failing to comply with an ASIC document request regardless of their intention.
10.36 Having strict liability apply to these offences also reduces non-compliance by ensuring that regulators can efficiently and expeditiously deal with low-level offending. This in turn bolsters the integrity of the regulatory regime enforced by ASIC and maintains public confidence in the regime.
10.37 The strict liability offences in Schedule 4 to the main Bill meet all the conditions listed in the Attorney-General's Department's A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers.
10.38 The fines for the offences do not exceed 60 penalty units for persons other than a body corporate or 300 penalty units for a body corporate.
10.39 The application of strict liability, as opposed to absolute liability, preserves the defence of honest and reasonable mistake of fact to be proved by the accused on the balance of probabilities. This defence maintains adequate checks and balances for persons who may be accused of such offences.
10.40 Given the harm that could come to ESS participants from improper use of their money, and the superior knowledge that businesses, directors, and other named persons have, these obligations are a reasonable and proportionate means of achieving the legitimate objective of protecting ESS participants' funds.
Conclusion
10.41 Schedule 4 to the main Bill is compatible with human rights because, to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.
Schedule 5 - Varying the GDP uplift factor for tax instalments
Overview
10.42 Schedule 5 to the main 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.
10.43 Schedule 5 to the main Bill amends the TAA 1953 to reduce the GDP adjustment factor for the 2022-23 income year to 2 per cent. The GDP adjustment factor is applied by the Commissioner to work out the amount of PAYG and GST instalments payable by a taxpayer in certain circumstances.
Human rights implications
10.44 Schedule 5 to the main Bill does not engage any of the applicable rights or freedoms.
Conclusion
10.45 Schedule 5 to the main Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 6 - Low and middle income tax offset
Overview
10.46 Schedule 6 to the main 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.
10.47 Schedule 6 to the main Bill amends the ITAA 1997 to increase the low and middle income tax offset for the 2021-22 income year by $420 to ease cost of living pressures for Australians.
Human rights implications
10.48 Schedule 6 to the main Bill does not engage any of the applicable rights or freedoms.
Conclusion
10.49 Schedule 6 to the main Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 7 - Safety net thresholds
Overview
10.50 Schedule 7 to the main 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.
10.51 The purpose of Schedule 7 to the main Bill is to amend the National Health Act 1953 to reduce the safety net thresholds for concessional beneficiary patients to 36 scripts (from 48) and general patients to $1457.10 (from $1542.10) on 1 July 2022.
10.52 After 1 May 2022, the indexation arrangements defined in s99G of the National Health Act 1953 will resume, with no change to their current operation. That is, the general patient safety net will be indexed by applying the index number (at section 99F of the National Health Act 1953) from the reference quarter (September) to the new general patient safety net ($1457.10) on the indexation day (1 January 2023).
10.53 The concessional safety net threshold will continue to be determined as a multiple of concessional payment co-payments (which are indexed, resulting in the overall increase of the concessional safety net threshold).
Human rights implications
10.54 Schedule 7 to the main Bill engages Articles 9 and 12(1) of the ICESCR, specifically the rights to health and social security.
10.55 Article 9 of the ICESCR recognises the right to social security. It requires that a country must, within its maximum available resources, ensure access to a social security scheme that provides a minimum essential level of benefits to all individuals and families that will enable them to acquire at least essential health care. Article 12(1) of ICESCR promotes the right of all individuals to enjoy the highest standard of physical and mental health. The PBS assists with advancement of these human rights by providing subsidised access to medicines for Australians.
10.56 Schedule 7 to the main Bill assists with the progressive realisation by all appropriate means of the right of everyone to essential healthcare and the enjoyment of the highest attainable standard of physical and mental health by reducing the safety net thresholds for both concessional beneficiary and general patients, improving the affordability of PBS items. There may be a perception that those patients that met the safety net thresholds prior to 1 July 2022 are disadvantaged as they had to pay a higher amount for medicines that under the new bill post 1 July 2022 will be at a reduced price (or free of charge for concessional beneficiary patients). These patients will continue to be eligible for the safety net rate for their medicines after 1 July 2022 and will benefit from significantly reduced safety net thresholds in future years.
Conclusion
10.57 Schedule 7 to the main Bill is compatible with human rights as it does not raise any human rights issues. The amendments made by this Schedule will have a beneficial impact on human rights by helping to ensure Australians can access the best available medicines through more reliable supply and continued subsidy of new treatments as they emerge.
Schedule 8 - 2022 cost of living payment
10.58 Schedule 8 to the main 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
10.59 Schedule 8 to the main Bill provides for the payment of 2022 cost of living payment of $250 to approximately 6 million Social Security and Veterans' income support and compensation recipients, Farm Household Allowance recipients, and holders of a Pensioner Concession Card, Commonwealth Seniors Health Card or Commonwealth Gold Card.
10.60 To be qualified for the 2022 cost of living payment, a person must be residing in Australia and be receiving one of the qualifying payments or hold or have claimed and qualified for one of the qualifying concession cards on 29 March 2022.
Human rights implications
10.61 This Schedule engages the following human rights:
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- The right of everyone to social security in Article 9, and the right of everyone to an adequate standard of living for an individual and their family, including adequate food, clothing and housing, and the continuous improvement of living conditions in Article 11 of the ICESCR; and
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- The rights of the child in Article 26 of the Convention on the Rights of the Child.
The right of everyone to social security and an adequate standard of living
10.62 The objective of creating a new cost of living payment promotes Article 9 and Article 11 by providing further payment to assist in achieving an adequate standard of living. The pursuit of this objective also promotes human rights by supporting the Convention on the Rights of Persons with Disabilities.
The rights of the child
10.63 This cost of living payment promotes Article 26 by enhancing the rights of the child to social security, as the payment will be made to a group of recipients with children, including recipients of Parenting Payment Single. The payment is targeted at vulnerable groups who receive Government assistance and has a flow on effect to the children of recipients by increasing the support for families.
Conclusion
10.64 Schedule 8 to the main Bill is compatible with human rights because it promotes the protection of human rights for some of the most vulnerable groups in society.
Schedule 9 - Fuel duty consequential amendments
Overview
10.1 Schedule 9 to the main 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.
10.2 Schedule 9 to the main Bill makes a consequential amendment to the Product Stewardship (Oil) Regulations 2000. The amendment ensures that the benefit available for gazetted oil (category 8) under the Product Stewardship for Oil program continues to be equal to the rate of duty payable on petroleum-based lubricants and fluid oils and their synthetic equivalents despite the reduction in the duty rate during the rate reduction period from 30 March 2022 to 28 September 2022.
Human rights implications
10.3 Schedule 9 to the main Bill does not engage any of the applicable rights or freedoms.
Conclusion
10.4 Schedule 9 to the main Bill is compatible with human rights as it does not raise any human rights issues.
Excise Tariff Amendment (Cost of Living Support) Bill 2022
Overview
10.5 The Excise 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.
10.6 The Excise Bill amends the Excise Tariff Act to temporarily reduce the excise duty rates for fuels, including petrol and diesel and similar petroleum-based products, including oils and grease by 50 per cent.
Human rights implications
10.7 The Excise Bill does not engage any of the applicable rights or freedoms.
Conclusion
10.8 The Excise Bill is compatible with human rights as this Bill does not raise any human rights issues.
Customs Tariff Amendment (Cost of Living Support) Bill 2022
Overview
10.9 The Customs 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.
10.10 The Customs Bill amends the Customs Tariff Act to temporarily reduce the excise-equivalent customs duty rates for fuels, including petrol and diesel and similar petroleum-based products, including oils and grease by 50 per cent.
Human rights implications
10.11 The Customs Bill does not engage any of the applicable rights or freedoms.
Conclusion
10.12 The Customs Bill is compatible with human rights as it does not raise any human rights issues.