Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I note that Senator Watson is still here. I just want to clear something up. In referring to my comments about the tax office, self-managed superannuation funds and, in particular, Westpoint, I do not suggest that Senator Watson intentionally misconstrued my remarks. But let me make very clear what I am saying about the tax office and where I think the tax office has failed in its duty and responsibility—and I said this at the Senate estimates hearings. The tax office regulates self-managed superannuation funds. It has direct responsibility for their regulation. I accept Senator Watson’s point that ASIC has effectively direct responsibility for regulation of financial planners. That is a fact. It also has responsibility for independent clearing houses. That is a fact. ASIC does not have legal authority—although it is being contested, as I understand it—over so-called promissory notes, which were the financial mechanism in respect of Westpoint entities.

My point of concern about the tax office is that, since ASIC now knows the names of the planners who were promoting the use of self-managed superannuation funds in some, but not all, cases in respect of Westpoint, I asked the tax office at estimates—I did not want individual names and I did not ask for individual names of planners from ASIC; I specifically refrained from making that request—

John Watson (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Senator Watson interjecting—

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I criticise those planners but I am criticising, Senator Watson, the lack of action by the tax office once it knew that abuse was occurring in respect of Westpoint entities and its failure to go and check the investments in Westpoint through self-managed superannuation funds. It seems to me to be reasonable, as ASIC is investigating the activities of a number of planners with respect to the establishment of self-managed superannuation funds—that is fact; ASIC is doing that—and ASIC meets regularly with the tax office, so I am told by both ASIC and the tax office, that part of that investigation, given that the tax office has regulatory oversight of self-managed superannuation funds, would at that point be—

John Watson (Tasmania, Liberal Party) Share this | Link to this | Hansard source

It’s not a consumer protection role.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

But it does have responsibility, Senator Watson, for regulating self-managed superannuation funds. It seems to me to be not unreasonable that the tax office would go and check the self-managed superannuation funds through which investments were placed in Westpoint to see if they comply with the law. They may well comply with the law. We do not know because the tax office has not checked. That is my concern about the tax office’s lack of activity in respect of Westpoint—it has not checked. The tax office admitted that to me at Senate estimates. I was not asking it for names or who it had checked or had not checked. I wanted to know whether the tax office had specifically followed through on the self-managed superannuation funds. It has regulatory oversight with respect to the Westpoint investments. That is what I wanted to know, as a matter of fact, and the tax office said, ‘No’.

The tax office may not have enough resources—it is only checking 3,000 out of 300-odd thousand a year—and I think that was implied in a response from one of the tax office officials. But the fact is that it has not attempted, at least not to the date of the estimates hearing, a specific check on self-managed superannuation funds for which it has regulatory oversight.

John Watson (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Senator Watson interjecting—

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

It was given it to comply with the law. It has not started to do that. That is what I am suggesting, Senator Watson. I am critical of the tax office for not having begun that process.

John Watson (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Senator Watson interjecting—

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

It does have the power to regulate self-managed superannuation funds within the various acts, but it has not bothered to check yet, Senator Watson. That is my point. I do not suggest that the tax office is solely responsible. There is a very wide-ranging debate about this in respect of ASIC and what it did or did not do and whether there is power with respect to promissory notes. There are legitimate criticisms about financial planners and the commissions that were being charged in some cases. There are a whole range of issues. But in the context of the schedule that we are dealing with in this piece of legislation—which rightly, in Labor’s view, imposes sanctions against promoters of these tax schemes rather than placing all of the responsibility on the victims of them—I made a passing comment about what I think was a reasonable critique of the tax office in respect of self-managed super funds and the Westpoint financial scandal.

The amendment we are considering, as I outlined in my speech in the second reading debate, brings the tax act in line, quite precisely in its wording, with the provisions that we have in respect of bribery in this country.

George Brandis (Queensland, Liberal Party) Share this | Link to this | Hansard source

Senator Sherry, if you are going to turn to your amendment, I do not think it has yet been formally moved. Would you move that?

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Thank you, Mr Acting Deputy President. I move opposition amendment (1) on sheet 4892:

(1)    Schedule 2, page 39, (after line 10), at the end of Part 2, insert:

Part 2A—Other business related costs

Income Tax Assessment Act 1997

50A Subsection 26-52(4)

Repeal the subsection, substitute:

        (4)    An amount is not a bribe to a foreign public official if:

             (a)    it is incurred for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature; and

             (b)    the value of the benefit was of a minor nature; and

             (c)    as soon as practicable after the loss or outgoing was incurred, the person made a record of the loss or outgoing and the record complies with subsection 70.4(3) of the Criminal Code Act 1995.

On the face of it, there are very minor wording differences, as I pointed out in my speech in the second reading debate. We have based the amendment on the observations and critique of the OECD and the antibribery convention of 1997, seeking to ensure that the Senate adds an amendment that aligns the tax law with the Criminal Code. There was a fair amount of discussion about this in principle, before I dared to mutter that name ‘AWB’ at the estimates hearing and the minister suddenly went into high alert at those magic syllables. But we had a fairly significant discussion on it before we got to AWB. I think it was the mention of the number 300 million that got the minister interested in my line of questioning.

We know—and it was an interesting exchange—that the tax office has not had to deal with any taxpayer under the current provisions. That was clear from the tax office’s evidence. There is some doubt as to the tax office’s powers. We seek to remove that doubt so that no-one can get away with claiming as legitimate deductions what effectively, even though not known at the time, were bribes. We do not want the ATO to have absolutely any doubt about its capacity to ensure the collection of tax owing where a false claim has been made relating to something which was effectively a bribe. That is a very serious matter, and we do not want any doubt over the tax office’s powers in respect of its ability to collect the tax owing and apply the penalties to what are effectively bribes.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

I have a few questions for the minister. On the surface, this opposition amendment is an attractive proposition to get consistency between the Criminal Code and the tax act with respect to the measure. I am fortunate in that I am dealing with a minister who is a barrister. If there is an inconsistency between the two, if someone had made a payment which the tax office had not regarded as a bribe under their legislation and had given a tax concession and then, subsequently, that person was prosecuted under the Criminal Code for the same transaction as having paid a bribe, I would assume that a reasonable defence for that person would be that they had already been allowed that payment as a legitimate one under the tax act. It would seem to me that to consider the matter otherwise would introduce the notion of double jeopardy. As a person who is not a lawyer but has had a lot to do with the law, that would be the first proposition I would seek to have tested.

The second thing that concerns me is that I suspect it is far more likely for these matters to turn up in tax affairs than it is for them to turn up in criminal matters. I understand that, to date, there never has been a prosecution under the Criminal Code for bribery as also determined under the tax act. I cannot recall whether the tax office have advised us whether there have been instances where this matter has been dealt with under tax affairs, but my assumption is that it is more likely to turn up in tax in the process of examining transactions than it is in the criminal sense. My expectation is that the difference between the two has arisen by accident. So my question is: did it arise by accident? Perhaps it is necessary to make the two more consistent on a practical basis.

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

Firstly, I will deal with the amendment that Senator Sherry has now moved concerning the alignment of the definitions of facilitation payments in the tax act with those in the Criminal Code. This is a very interesting area. I can recall very clearly chairing a special subcommittee of the Joint Standing Committee on Treaties that looked critically at the treaty and the enabling legislation. My memory is a bit hazy and I do not quite recall whether we actually dealt specifically with these issues, Senator Murray—I am just thinking about it as I respond to Senator Sherry.

The government has of course now adopted the OECD’s 1996 recommendation that member countries deny tax deductibility for bribes made to foreign public officials. That comes on top of the key strategy of making it a criminal offence to pay bribes to foreign public officials. As indeed debate has reminded us all, it was part of the OECD’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, which came into force in Australia on 17 December 1999. In October 2006 Australia will respond to the OECD’s working group on bribery on how recommendations in its January 2006 report, which examined the convention’s application, have been addressed. The Attorney-General has carriage of responding to the OECD report.

As to whether the law in relation to facilitation payments is not aligned, the OECD report itself noted—and this deals to some extent with the alleged lack of congruence between the two:

The ATO believes that the definition of “routine government action” under subsection 26-52(4) of the Income Tax Act, which is identical to the definition under subsection 70.4(2) of the Criminal Code, is sufficient support to restrict facilitation payments to those of a minor nature. It is the position of the ATO that due to the definition of “routine government actions” of a minor nature, as specified under the Income Tax Act, it is not possible that a payment in order to obtain such an action could be anything but “minor”.

Moreover, the deputy commissioner in charge of serious noncompliance indicated at the recent estimates hearing—at which I was present, as Senator Sherry alludes—that, in practice, the income tax law and the Criminal code have the same requirements. For those reasons, the government does not support the amendment.

Further, in response to Senator Murray, the Criminal Code sets out its own points of defence. The code of course is a separate act to the Income Tax Assessment Act. It is not a defence to say that a tax deduction has been allowed. I am pretty sure that that is the correct position—I am getting nods. I think that deals substantially with Senator Murray’s points. For those reasons, the government will not be supporting Senator Sherry’s amendment.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

I will ask a question, if I may. Of the two, which is the stronger or tighter, if you like, in terms of its wording? I have not got the Criminal Code before me, so I do not know.

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

I am not saying that I have the definitive answer here, but I would think that the fact that the Criminal Code does set out its own points of defence means it would prevail. I have some additional advice here, and I was correct. The purpose of the Criminal Code is to convict people of criminal offences, while the income tax law is for a different purpose, albeit a very important purpose about calculating taxable income, including what expenditure is allowed as a deduction. For that reason, we think that the income tax law is sufficiently robust but, because they have different purposes and because the Criminal Code relates to the conviction of criminal offences, those particular defences are coherent on their own. We think that, taken together, it is a coherent statement of obligations and potential defences.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

Do you think that this area of legal definition, both in the Criminal Code and in the tax act, will be of interest to Commissioner Cole? I assume that, in coming back with his final report, he would be making recommendations which would include legislative changes, if those matters were drawn to his attention. I ask you the question deliberately because, even though you were saying that the government has a particular view—if there is an area of some dispute, it might be worthwhile drawing this to the attention of Commissioner Cole’s officers so that they could consider whether or not it is a matter they wish to deal with either in evidence or in their final report.

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

Thank you, Senator Murray, for that suggestion. Obviously, Commissioner Cole has specific terms of reference. I do not have them in front of me, so I cannot hazard a guess as to whether or not an inquiry of the kind you are referring to would be contemplated or at least whether the terms of reference would enable that kind of response. Clearly, Commissioner Cole will make findings as to a number of matters. I cannot pre-empt what view he might take of the interaction of the tax act and the other provisions, but I would think that he would not be constrained, if he thought it was appropriate, in bringing it to the government’s attention. If he feels that he needs to get some extension of the terms of reference to deal with a particular point, we have made it publicly very clear that he is entitled to ask.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

My question and your answer therefore lead to a conclusion that it is open to either the government or the opposition to write to Commissioner Cole, drawing his attention to the different provisions of the Criminal Code and the tax act with regard to bribery and facilitation payments and making the case either one way or the other. That is so, isn’t it? There is nothing to prevent that.

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

What other parties may do is a matter for them and what view the commissioner might make of other parties writing to him about these matters is a matter for the commissioner. From the government’s point of view, we think that the terms of reference that we have given are adequate. They have been extended on one occasion, as Commissioner Cole has seen fit to ask. The position so far, as I understand it, is that, if he were to ask for some extension to his terms of reference to enable him to deal with some pertinent matter, he would be entitled to do so. I doubt very much whether the government will be doing that.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I will be brief. I do have a copy of the relevant provisions in the Criminal Code Act 1995 and the tax act 1997. As I have indicated, the wording is slightly different, but there is a difference. In the Criminal Code, division 70.4(1)(a) says:

The value of the benefit was of a minor nature ...

That is not contained in the tax act 1997. Labor believe there is some doubt, but this has never been tested before by the tax office. We believe that any doubt should be removed. These are very serious circumstances, and we believe that we should take the opportunity to correct it.

Question put:

That the amendment (Senator Sherry’s) be agreed to.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

The Democrats have only one amendment, which is on sheet 4778a, which has been circulated, and I now move our amendment (1):

(1)    Schedule 1, item 2, page 18 (after line 5), omit “*spouse”, insert “spouse, being a person who is living with another person on a bona fide domestic basis although not legally married to that other person, including a same sex partner,”.

We think we have stumbled on an oversight in the design of this schedule. I refer the minister to the definition in the bill of who is considered to be a temporary resident. The third item says that you are not a temporary resident, and therefore you will not get that tax benefit, if you are married to an Australian resident. Our concern is that there are an awful lot of people who are not married, who are just shacked up and have a de facto relationship, which, as you know, in tax law is the equivalent of being married. So we think that if you do not cover off that particular possibility there will be temporary residents getting this tax benefit who are not entitled to it or who should not be entitled to it because they are in de facto arrangements with Australian permanent residents or citizens. So the purpose of the amendment is to try to correct an error that we have identified. I will be interested to see whether you think we have stumbled across a hole or whether you think there is a reasonable defence.

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

Thank you, Senator Murray. You will not be surprised to know that I always think that there is an arguable defence. The government takes the view that your amendment about the defining spouse is not necessary because the law already defines who is a spouse. Whether that includes same-sex partners is a matter of interpretation of existing law. We think that that is basically covered and we do not see the need for, nor do we agree with having just for this particular measure, a different meaning for spouse from its definition that is contained elsewhere and that has been given in the law. That is a roundabout way of saying that we do not support the amendment because we do not think that there is quite the oversight or the problem that Senator Murray alludes to. It is for those reasons that we will not be supporting the amendment.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I will just make the Labor position clear. Unfortunately we only received a copy of this at about 7.30, Senator Murray. Labor’s position on same-sex couples and superannuation matters is clear. We have an announced policy of full equity and we have supported amendments in that regard on other occasions in the Senate. However, this is not a superannuation measure. Labor’s position is that we accept the policy intent that Senator Murray has outlined. Labor’s policy is to make an audit of all provisions of Commonwealth law. On the face of it, we are not sure, given the lateness—and I am not critical of the lateness, Senator Murray, because of the circumstances this evening where we have had to deal with legislation—

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

On the run.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Yes, on the run, with some understandable difficulties given the circumstances of Senator Fielding. The program had to be rearranged to meet those particular circumstances. So on this occasion we will not be supporting the amendment. We are not sure whether it is necessary for the issue you have raised. We would like to examine whether there is a gap; we have not been able to do that. In respect of same-sex couples in the non-superannuation areas right across the board, we wish to undertake an audit of all discriminatory provisions. We will not be supporting the amendment.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

Strangely enough—through you, Chair, to the minister—I do not much mind if you reject it if in fact the law is as you describe. My problem is that I am concerned about the definition in the explanatory memorandum or in the bill, as I understand it. It says that a temporary resident necessitates that the individual concerned is not married to an Australian resident. If that is not exclusive or exhaustive, of course, you can add also that he or she is not in a de facto relationship. My concern is solely the potential for revenue loss. As you know, if ministers in debate give their words a particular meaning it has an effect in law in certain circumstances. If you were to give the chamber an assurance that temporary residents who are in de facto relationships with Australian citizens or residents will not be entitled to this tax concession, then I will be much more content than if you simply reject the amendment and we are left uncertain of the application of the law. This is my understanding of Senator Sherry’s reaction. He seems to indicate he is not certain of the law and he will have a look at it later on. I would rather be assured here and now that de facto relationships with an Australian citizen or resident will exclude a temporary resident from the tax concession.

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

Thank you, Senator Murray and Senator Sherry. I appreciate the purport of the comments that you have placed on record, but my advice is that the amendment is not necessary because, as I have said, the law already defines who is a spouse—de facto or otherwise—and whether that includes same-sex partners is a matter of interpretation of the existing law. My advice is that the government simply does not see the need for, nor does it agree with having, for this purpose anyway, a meaning for spouse just for this measure that is different from its meaning that is pretty clearly defined elsewhere in the law. While I do appreciate the purport of your contribution, Senator Murray, that is my advice and I think that is correct. From previous occasions when I have looked at it, I believe it would be covered and there is no ambiguity.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I was left unable to determine whether the legislation as it stands does cover same-sex partners. Could the minister tell us yes or no to that?

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

Thank you, Senator Brown. My statement to the chamber was that the law already defines who is a spouse, de facto or otherwise, and whether that includes same-sex partners is a matter of interpretation of existing law. So in those circumstances we consider that the issue of same-sex partners is covered by the definitions.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Well, is the government creating legislation? The minister says it is a matter of interpretation. Does it cover same-sex partners or does it not?

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

I do not know how else to say it: it is a matter of interpretation. For the purposes of our deliberations here in respect of this bill, it is certainly open to interpretation that it includes same-sex partners. That, as I understand it, would be a conclusion that could be drawn from the way in which it is cast and the way in which the interpretations define who is a spouse.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Is it the minister’s intention that the legislation, as it stands, covers same-sex partners?

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

What I said was, and I will say it again, that we consider that Senator Murray’s amendment is not necessary because the law already defines who is a spouse, which includes de facto or otherwise. It is open to interpretation that it also includes same-sex partners. That is a matter of interpretation of the existing law and we think that that particular situation is covered.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I will not prolong this but the minister is obviously ducking and weaving. It is open to interpretation by whom, for goodness sake? She ultimately means that a court will have to interpret it. The proper way for legislation to go through this parliament is to make it clear to the courts what is intended. If the government intends to cover same-sex partners it should say so. That is what Senator Murray’s amendment does and that is why we should support it and that is why I hope the Labor Party will support it as well.

It is not just sloppy; in this case the minister herself is saying that we will leave it open to a court to determine what we mean by the words we have here. You should not do that; you should be very clear about it and leave nobody in a position where they have to pay lots of money to get a good barrister to go to a court and argue that words that are not clear mean such and such. We should make it clear for them. If the government intends this to cover same-sex partners then it should support this amendment and so should the opposition.

John Hogg (Queensland, Deputy-President) Share this | Link to this | Hansard source

The question is that the amendment moved by the Australian Democrats on sheet 4778a be agreed to.

Question negatived.

Bill agreed to.

Bill reported without amendment; report adopted.