Explanatory Memorandum
(Circulated by authority of the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP)Chapter 8: Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024
Capital Works (Build to Rent Misuse Tax) Bill 2024
Schedule 1 - Build to rent developments
Overview
8.1 Schedule 1 to the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
8.2 Build to rent (BTR) developments are multi-unit buildings where the units, instead of being sold, are rented out.
8.3 The object of the Bill is to increase the supply of rental housing, including affordable tenancies, by improving incentives for institutional investors to support the construction of new BTR developments.
8.4 The Bill amends the Income Tax Assessment Act 1936 (ITAA 1936), Income Tax Assessment Act 1997 (ITAA 1997) and Taxation Administration Act 1953 (TAA 1953), in order to:
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- increase the capital works deduction rate from 2.5 per cent to 4 per cent per year for eligible new BTR developments; and
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- reduce the final withholding tax rate on eligible fund payments from managed investment trust (MIT) investments for eligible new BTR developments from 30 per cent to 15 per cent.
8.5 These tax concessions are only intended to apply to BTR developments that remain continuously active BTR developments throughout a 15-year compliance period.
Human rights implications
8.6 The Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
8.7 The Bill engages the following rights:
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- Article 11(1) of the International Covenant on Economic, Social and Cultural Rights (ICESCR) – the right to an adequate standard of living; and
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- Article 12(1) of the ICESCR – the right to health.
Right to an adequate standard of living, including food, water and housing
8.8 The Bill engages the right to an adequate standard of living, including food, water and housing under Article 11 of the ICESCR.
8.9 The right to an adequate standard of living provides that Australia must take appropriate steps towards the realisation of this right in its jurisdiction, and that the relevant standard must be continuously improving.
8.10 The United Nations Committee on Economic, Social and Cultural Rights (the Committee) has stated that the 'right to adequate housing, which is thus derived from the right to an adequate standard of living, is of central importance for the enjoyment of all economic, social and cultural rights'. [1] The Committee has highlighted the importance of housing affordability as part of this right:
'Personal or household financial costs associated with housing should be at such a level that the attainment and satisfaction of other basic needs are not threatened or compromised ... States parties should establish housing subsidies for those unable to obtain affordable housing, as well as forms and levels of housing finance which adequately reflect housing needs.' [2]
8.11 The Bill seeks to improve housing outcomes for Australians. The new tax concessions for eligible BTR developments (increased capital works deduction rate and reduced withholding rate on MIT payments) incentivise entities who construct or own building developments to construct new BTR developments and to hold and maintain these assets in Australia under single ownership. As part of the eligibility requirements for a BTR development, a minimum number of dwellings made available for tenancy or must be tenanted as affordable dwellings (dwellings that are made available for rent, and rented, at 74.9 per cent or less of comparable market rents and that satisfy any additional requirements). As such, the Bill is designed to incentivise construction of new BTR developments and in turn increase the supply of rental housing, including affordable tenancies.
8.12 Thus, the Bill allows Australians to meet an adequate standard of housing and supports the attainment and satisfaction of their other needs. The Bill therefore promotes the right to an adequate standard of living, including food, water and housing. Right to health
8.13 The Bill engages the right to health under Article 12 of the ICESCR.
8.14 Article 12 of the ICESCR protects the right of all individuals to enjoy the highest attainable standards of physical and mental health. The Committee has stated that the right to health embraces a wide range of socio-economic factors that promote conditions in which people can lead a healthy life, which includes housing.
8.15 By incentivising greater investment in rental housing stock (including affordable tenancies), the Bill supports access to housing through increased availability of rental housing stock, including affordable tenancies. The Bill therefore improves the right to health.
Conclusion
8.16 The Bill is compatible with human rights as they support the right to an adequate standard of living, and the right to health.
8.17 The Bill does not raise any other human rights issues.
Capital Works (Build to Rent Misuse Tax) Bill 2024
Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024
Overview
8.18 The Capital Works (Build to Rent Misuse Tax) Bill 2024 (the Imposition Bill) ensures the integrity of the tax concessions made available in the Bill by providing for the levy of a misuse tax in the event that an entity improperly claims one or both of the tax concessions.
Human rights implications
8.19 The Imposition Bill does not engage any of the applicable rights or freedoms.
8.20 The Imposition Bill imposes the BTR development misuse tax, which is a key integrity feature of the BTR scheme. The BTR misuse tax approximately claw backs tax benefits claimed by entities where the BTR development ceases to be an active BTR development during the 15-year BTR compliance period. The Imposition Bill does not directly advance or limit a relevant human right or freedom.
Conclusion
8.21 The Imposition Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 2 – Buy Now, Pay Later
Overview
8.22 Schedule 2 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
8.23 Schedule 2 to the Bill extends the application of the Credit Code to Buy Now, Pay Later (BNPL) contracts and establishes low cost credit contracts (LCCCs) as a new category of regulated credit. LCCCs are continuing or non-continuing credit contracts for providing credit to consumers on a low cost basis. Most BNPL contracts will be regulated as LCCCs. Schedule 2 to the Bill amends the Credit Act to establish an optional modified RLO framework available to LCCCs. Schedule 2 to the Bill also creates new regulation-making powers in respect of LCCCs. The overarching aim of this measure is to provide appropriate and proportionate protections to consumers who enter LCCCs, while maintaining the benefits of consumer access to these kinds of credit products.
8.24 Schedule 2 to the Bill seeks to achieve this outcome by:
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- requiring providers of LCCCs to hold and maintain an Australian credit licence and comply with the relevant licensing requirements and licensee obligations, with some modifications to ensure regulation is proportionate to the relatively low risk posed by LCCCs;
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- modifying the existing RLO framework to create an alternative, opt-in framework that scales better with the risks posed to consumers and requires each LCCC provider to develop and review a written policy on assessing whether an LCCC would be unsuitable for the consumer;
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- allowing LCCC providers and consumers to exchange information via mobile applications (apps) and other technologies; and
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- engaging existing anti-avoidance prohibitions to prevent LCCC providers from structuring their business models to avoid regulation.
Human rights implications
8.25 Schedule 2 to the Bill engages the following rights:
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- the right to a fair trial and fair hearing rights under Articles 14 and 15 of the International Covenant on Civil and Political Rights (ICCPR); and
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- the right to protection from arbitrary or unlawful interference with privacy under Article 17 of the ICCPR.
Right to a fair trial and fair hearing rights
Assessment of civil penalties
8.26 Civil penalty provisions may engage criminal process rights under Articles 14 and 15 of the ICCPR regardless of the distinction between criminal and civil penalties in domestic law. This is because the word 'criminal' has an autonomous meaning in international human rights law. When a provision imposes a civil penalty, an assessment is therefore required as to whether it amounts to a 'criminal' penalty for the purposes of Articles 14 and 15 of the ICCPR.
8.27 Schedule 2 to the Bill extends certain civil penalty and criminal penalty provisions in the Credit Act and Credit Code to LCCCs. The civil penalty provisions in the Credit Act and Credit Code are intended to deter people from non-compliance with their obligations under the Credit Act and Credit Code. None of the civil penalty provisions carry a penalty of imprisonment and there is no sanction of imprisonment for non-payment of any penalty.
8.28 Further, the provisions do not apply to the general public, but to a sector or class of people – namely, providers of LCCCs and their representatives (if any), who should reasonably be aware of their obligations under the Credit Act and Credit Code. Imposing these civil penalties enables an effective disciplinary response to non-compliance.
8.29 The maximum civil penalty amounts that can be imposed under Schedule 2 to the Bill are intentionally significant and are in line with the penalties for other provisions in the Credit Act and Credit Code. The Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers outlines that larger penalties are more appropriate for bigger companies, as they provide an adequate deterrent.
8.30 The judiciary will continue to have discretion to consider the seriousness of the contravention and impose a penalty that is appropriate in the circumstances. The civil courts are experienced in making civil penalty orders at appropriate levels having regard to the maximum penalty amount, taking into account a range of factors including the nature of the contravening conduct and the size of the organisation involved. Therefore, a relevant consideration in setting a civil penalty amount is the maximum penalty that should apply in the most egregious instances of non-compliance with the Credit Act and Credit Code.
8.31 The extension of civil penalty provisions in the Credit Act and Credit Code to LCCCs, via Schedule 2 to the Bill, should not be considered 'criminal' for the purposes of Articles 14 and 15 of the ICCPR. These provisions are regulatory and disciplinary, and they aim to encourage compliance with the Credit Act and Credit Code.
Presumption of avoidance for certain schemes in civil cases
8.32 Schedule 2 to the Bill engages the right to a fair trial as well as the presumption of innocence in Articles 14 and 15 of the ICCPR as it extends certain civil penalty and criminal penalty provisions in the Credit Act and Credit Code to LCCCs. Article 14(2) of the ICCPR recognises that all people have the right to be presumed innocent until proven guilty according to the law. Articles 14 and 15 apply only in relation to the rights of natural persons, not legal persons, such as companies.
8.33 Schedule 2 to the Bill amends sections 323, 323A and 323B of the Credit Act to extend the application of the anti-avoidance provisions to LCCCs. As such, conduct relating to LCCCs are subject to the presumption that a person entered into or carried out a scheme for an avoidance purpose if the scheme is a scheme prescribed by the regulations or determined by ASIC in a legislative instrument, as per section 323C of the Credit Act.
8.34 However, the presumption does not apply if the person proves that it would not be reasonable to conclude that there was a relevant avoidance purpose, having regard to the avoidance matters specified in subsection 323B(1) of the Credit Act.
8.35 Placing the legal burden of proof on the person is appropriate as it is considerably easier for the person to establish that it would not be reasonable to conclude that there was a relevant avoidance purpose, compared with requiring ASIC to disprove that matter. For example, if the scheme in question does have a legitimate (non-avoidance) purpose, that matter would be peculiarly within the knowledge of the person.
8.36 Further, the presumption applies only in civil cases, not in criminal proceedings, and any regulations or legislative instruments made to prescribe or determine schemes that are presumed to have the relevant avoidance purpose are subject to parliament scrutiny and disallowance.
Privacy
8.37 Article 17(1) of the ICCPR provides for the right to not be subjected to arbitrary or unlawful interference with an individual's privacy. In order for the interference with privacy not to be 'arbitrary', any interference must be reasonable in the particular circumstances. Reasonableness, in this context, incorporates notions of proportionality to the end sought and necessity in the circumstances.
8.38 Schedule 2 to the Bill may engage the right to privacy by allowing for the collection, use and disclosure of personal information of consumers who enter into LCCCs by LCCC providers.
8.39 For example, Part 3-2BA of the Bill provides for additional rules relating to licensees under LCCCs, including to modify the obligations that the licensee has under Part 3-2 of the Credit Act to both assess whether an LCCC is unsuitable for a consumer before doing particular things in relation to the contract; and not to enter into, or increase the credit limit of, an LCCC that is unsuitable for a consumer.
8.40 These sections may engage consumers' right to privacy as they require an LCCC provider to assess unsuitability of a consumer to enter into a contract, which in turn requires an LCCC provider to make reasonable inquiries about the consumer, including with respect to the consumer's financial situation.
8.41 However, the amendments make it clear that any personal information of consumers may only be collected and used for particular purposes, that is, to facilitate assessments of unsuitability to enter into LCCCs. Existing privacy safeguards continue to apply, that is, the Privacy Act 1988 applies to the handling of personal information and information relating to credit reporting.
Conclusion
8.42 Schedule 2 to the Bill is compatible with human rights because, to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.
Schedule 3 - Medicare levy exemption for lump sum payments
Overview
8.43 Schedule 3 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
8.44 Schedule 3 to the Bill amends the Medicare Levy Act to exempt eligible lump sum payments in arrears from the Medicare levy.
Human rights implications
8.45 Schedule 3 to the Bill does not engage any of the applicable rights or freedoms.
8.46 The amendments provide concessional tax treatment for individuals in receipt of eligible lump sum payments in arrears. The concessional tax treatment puts individuals into a similar position they would have been, had they been paid correctly in the earlier income years. The amendments are intended to ensure that individuals are not disadvantaged by having to pay a higher amount of Medicare levy amount resulting from the receipt of the lump sum payment in arrears.
Conclusion
8.47 Schedule 3 to the Bill is compatible with human rights as it does not engage any human rights issues.
Schedule 4 — Multinational tax transparency – country by country reporting
Overview
8.48 Schedule 4 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
8.49 Schedule 4 to the Bill amends the Taxation Administration Act 1953 to require certain large multinational enterprises (defined as country by country reporting parents) to publish selected tax information on a country by country basis for specified jurisdictions and on an aggregated basis for the rest of the world. The information is to be published on an Australian government website, with publication facilitated by the Commissioner. The objective of these amendments is to improve information flows to help the public, including investors, to compare entity tax disclosures, to better assess whether an entity's economic presence in a jurisdiction aligns with the amount of tax they pay in that jurisdiction.
Human rights implications
8.50 Schedule 4 to the Bill does not engage any of the applicable rights or freedoms, as it applies to multinational entities not individuals.
Conclusion
8.51 Schedule 4 to the Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 5 – Deductible gift recipients
Overview
8.52 Schedule 5 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
8.53 Schedule 5 to the Bill amends the ITAA 1997 to list as deductible gift recipients:
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- Australian Democracy Network Ltd; and
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- Australian Science Media Centre Incorporated; and
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- Centre for Australian Progress Ltd; and
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- Combatting Antisemitism Fund Limited; and
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- Ethnic Business Awards Foundation Limited; and
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- International Campaign to Abolish Nuclear Weapons, Australia Inc.; and
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- Ourschool Ltd; and
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- Susan McKinnon Charitable Foundation Ltd; and
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- Tasmanian Leaders Inc.; and
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- The Hillview Foundation Australia Limited.
Human rights implications
8.54 Schedule 5 to the Bill does not engage any of the applicable rights or freedoms.
Conclusion
8.55 Schedule 5 to the Bill is compatible with human rights as it does not raise any human rights issues.
Schedule 6 - National skills and workforce development payments
Overview
8.56 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.
8.57 Schedule 6 to the Bill makes amendments to the Federal Financial Relations Act 2009 to support Commonwealth payments to the States in accordance with the National Skills Agreement and any successor agreements.
Human rights implications
Right to education
8.58 These amendments engage the right to education, as referred to in Article 13 of the International Covenant on Economic, Social and Cultural Rights, Articles 28 and 29 of the Convention on the Rights of the Child, and Article 24 of the Convention on the Rights of Persons with Disabilities.
8.59 The amendments promote the right to education as they support the National Skills Agreement which provides States and Territories with access to funding that relates to strengthening the vocational education and training sector.
Right to work
8.60 The amendments engage the right to work under Article 6 of the International Covenant on Economic, Social and Cultural Rights and Article 27 of the Convention on the Rights of Persons with Disabilities.
8.61 The right to work is a right of all people to have the opportunity to gain their living by work they freely choose, allowing them to live in dignity. The amendments promote the right to work as they support funding to States and Territories for skills and workforce development. The funding will be used to deliver programs, services, and reforms to better improve and support Australians in obtaining skills and capabilities, broadening the opportunity for the right to work.
Conclusion
8.62 Schedule 6 to the Bill is compatible with human rights as it promotes the right to education, the right to work by supporting funding to the States and Territories to deliver programs, services and reforms with respect to skills and workforce development.
Schedule 7 - $20,000 instant asset write-off for small business entities
Overview
8.63 Schedule 7 to the Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
8.64 Schedule 7 to the Bill amends the IT(TP) Act to extend the $20,000 instant asset write-off by 12 months until 30 June 2025. This will allow small businesses (with an aggregated annual turnover of less than $10 million) to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use for a taxable purpose on or before 30 June 2025. The extension will improve cash flow and reduce compliance costs for small businesses.
Human rights implications
8.65 Schedule 7 to the Bill does not engage any of the applicable rights or freedoms.
Conclusion
8.66 Schedule 7 to the Bill is compatible with human rights as it does not raise any human rights issues.