Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
THE SENATE
NATIONAL BROADBAND NETWORK
COMPANIES BILL 2010
SUPPLEMENTARY EXPLANATORY MEMORANDUM
Amendments to be moved on behalf of the Government
(Circulated by authority of the Minister for Broadband, Communications
and the Digital Economy, Senator the Honourable Stephen Conroy)
NATIONAL BROADBAND NETWORK COMPANIES BILL 2010
OUTLINE
The purpose of the National Broadband Network Companies Bill 2010 (the
Companies Bill) is to establish the regulatory framework covering the
ownership and operations of NBN Co Limited (NBN Co), and the arrangements
for the eventual sale of the Commonwealth's stake in NBN Co.
The Government amendments and new clauses proposed to be moved by the
Government relate to the following:
. requiring the Communications Minister and the Finance Minister to
jointly make functional separation principles under clause 24;
. clarifying, for the avoidance of doubt, that a utility or authority
may not resupply a service supplied to it by an NBN corporation;
. exempting from State/Territory stamp duties and taxes two categories
of matters related to the structural separation of Telstra Corporation
Limited (Telstra) and the creation, development or operation of the
national broadband network; and
. amending the date by which the national broadband network is to be
declared built and fully operational, under subclause 48(1), to 31
December 2020.
FINANCIAL IMPACT STATEMENT
The amendments are not expected to have a financial impact for the
Commonwealth.
ABBREVIATIONS
The following abbreviations are used in this explanatory memorandum:
CCA: Competition and Consumer Act 2010
Companies Bill/Act: National Broadband Network Companies Bill 2010/that
Bill once enacted
NBN: National Broadband Network
Access Bill: Telecommunications Legislation Amendment (National
Broadband Network Measures-Access Arrangements) Bill
2011
Tel Act: Telecommunications Act 1997
TLA(CCS) Bill: Telecommunications Legislation Amendment (Competition and
Consumer Safeguards) Bill 2010
NOTES ON AMENDMENTS
AMENDMENT (1)
Amendment (1) omits item 2 of the table at clause 2 of the Companies Bill
and substitutes in its place three new items. This change is necessary as
the result of the proposed insertion of new clause 98A (see amendment (20)
below).
Item 2 of the table at clause 2 provides that clauses 3 to 98 and Schedules
1 and 2 to the Companies Bill will commence at the day after the Companies
Bill receives the Royal Assent, or immediately after the commencement of
item 2 of Schedule 5 to the Trade Practices Amendment (Australian Consumer
Law) Act (No. 2) 2010, whichever occurs later in time. Similarly, new item
2B of the table at clause 2 provides that clauses 99 to 101 to the
Companies Bill will commence the day after the Companies Bill receives the
Royal Assent, or immediately after the commencement of item 2 of Schedule 5
to that Act, whichever occurs later in time. These items are in
substantially the same terms as current item 2 of the table at clause 2 of
the Bill - the commencement of existing clauses 3 through 101 are
unaffected by these changes to the table.
New item 2A of the table at clause 2 provides that clause 98A of the
Companies Bill will commence on 22 March 2011, being the day after the
amendments are proposed to be introduced into Parliament. The stamp duty
exemption is provided to facilitate the structural reform of the
telecommunications industry. Progressing this reform is a priority of the
Government. Therefore, the proposed exemption would operate on a
retrospective basis, from 22 March 2011, to enable transactions between
Telstra and NBN Co in support of the reforms to be progressed without
unnecessary delay. This approach is consistent with that applying to many
other Commonwealth tax measures.
The signing of the Definitive Agreements between Telstra and NBN Co (which
is discussed below) is most likely to be after the stamp duty trigger date.
Therefore, in order for the proposed stamp duty exemption under new clause
98A to be of practical effect, it must provide exemption from the date upon
which any stamp duty liability might be triggered.
Accordingly, this amendment ensures that the stamp duty exemption takes
effect from the specified date before the Definitive Agreements are
executed by Telstra and NBN Co.
AMENDMENT (2) - (16)
Amendments (2)-(16) represent changes made to the exemptions provided to
utilities under clauses 10 -16 of the Companies Bill. While the Companies
Bill as drafted makes it clear that services supplied by an NBN corporation
to a utility or transport body must be for the sole use of the entity
concerned, these amendments are being made to further confirm this matter
given concerns expressed by industry. Similar changes are being made by
amendments moved by the Government in relation to the Access Bill.
Clause 9 provides that an NBN corporation must not supply an eligible
service to another person unless the other person is a carrier or a service
provider. Clauses 10 - 16 of the Companies Bill sets out exemptions to the
general rule under clause 9, with each of those exemptions relating to the
provision of eligible services to the following entities:
. transport authorities (clause 10);
. electricity supply bodies (clause 11);
. gas supply bodies (clause 12);
. water supply bodies (clause 13);
. sewerage services bodies (clause 14);
. storm water drainage services bodies (clause 15); and
. State or Territory road authorities (clause 16).
Amendments (2)-(4), (6), (8), (10), (12), (14) and (16) make it clear that
the exemption for the specific body does not apply unless the carriage
service is supplied on the basis that the body must not re-supply the
carriage service. See the supplementary explanatory memorandum to the
Access Bill for further details about these changes.
Amendments (5), (7), (9), (11), (13) and (15) represent minor technical
changes flowing from the abovementioned changes.
AMENDMENT (17)
Subclause 24(1) of the Companies Bill provides that the Communications
Minister may, in writing, set out the functional separation principles that
apply in regard to the manner in which the functional separation of an NBN
corporation is to be achieved and maintained. Amendment (2) inserts the
words "and the Finance Minister" after "Communications Minister" in
subclause 24(1) of the Companies Bill. The purpose of this amendment is to
require both shareholder Ministers to jointly make a determination relating
to functional separation principles for the purposes of the application of
the Companies Act to a particular NBN corporation. This is consistent with
clause 25 of the Bill which requires both Ministers to make a functional
separation requirements determination.
AMENDMENT (18)
Amendment (18) removes subclause 24(4) which provided that the
Communications Minister must consult with the Finance Minister, before
making a determination under subclause 24(1). This amendment is
consequential to amendment (17).
AMENDMENT (19)
Amendment (19) alters the date by which the NBN must be declared by the
Communications Minister to be built and fully operational, under subclause
48(1). Existing clause 48 provides that the Communications Minister must
declare that the NBN should be treated as built and fully operational
during the period starting at the commencement of the section and ending at
the end of 30 June 2018. Amendment (19) would change this end date to 30
December 2020 This was consistent with the Government's original timeframe
for the NBN rollout of eight years. The revised date is consistent with NBN
Co Limited's corporate plan dated 15 December 2010, which indicates that
the rollout of the NBN will be complete by 31 December 2020.
AMENDMENT (20)
Amendment (20) inserts a new clause 98A in the Bill.
New clause 98A Exemption from stamp duty-matters related to the
creation, development or operation of the national broadband network
As part of the process of implementing structural separation, in accordance
with Part 33 of the Tel Act, Telstra is expected to enter into certain
agreements with NBN Co. Those agreements are known as the Definitive
Agreements. Telstra and NBN Co entered into a preliminary agreement on 20
June 2010 announcing their intentions to enter into such agreements - that
earlier agreement is referred to as the Financial Heads of Agreement
(FHoA).
The Definitive Agreements are expected to provide for three transactions:
. migration of Telstra's subscribers (set out in category A designated
matters);
. acquisition by NBN Co of Telstra conduits (set out in category B
designated matters); and
. access by NBN Co to Telstra infrastructure (set out in category B
designated matters).
The purpose of this new clause is to ensure that the transactions and
conduct involved in the Definitive Agreements under the FHOA between
Telstra and NBN Co are not subject to any State/Territory stamp duty or
other State/Territory tax. The Definitive Agreements will be critical to
delivering the envisaged structural reform of the telecommunications
sector. As such, the purpose of clause 98A is to facilitate the structural
reform of the telecommunications industry.
The Definitive Agreements will, among other things, give effect to the
structural separation of Telstra and the transfer of assets to NBN Co for
the purposes of creating, developing and operating the NBN. It is not
appropriate for the Definitive Agreements to be subject to stamp duty or
other State or Territory tax, because they are the mechanisms that give
effect to the Australian Government's preferred policy outcome: structural
reform of the telecommunications industry. As a fundamental component of
the government's reforms, the Definitive Agreements are not part of normal
business operations, and so it is appropriate for the transactions and
conduct involved in the Definitive Agreements to be exempt from State and
Territory stamp duty and taxes.
This approach is consistent with the approach adopted in section 577BA of
the Tel Act authorising, for the purposes of subsection 51(1) of the CCA,
certain conduct engaged in by Telstra, NBN corporations and other relevant
persons, where that conduct relates to an undertaking given by Telstra to
the ACCC under section 577A of that Act (a 'structural separation
undertaking'). The exemption offered by clause 98A is closely linked to the
operation of section 577BA of the Tel Act. The reason for this is to
ensure that the proposed exemption under clause 98A operates only to cover
the transactions and conduct relating to structural reform of the
telecommunications industry. NBN Co and Telstra would continue to be
subject to Commonwealth and State and Territory duties and taxes in the
usual manner in respect of dutiable/taxable transactions arising from their
ordinary day-to-day business operations.
Statutory exemptions from stamp duty and other State and Territory taxes
have previously been granted under Commonwealth legislation in analogous
circumstances.
Application of proposed stamp duty exemption
The proposed exemption (under clause 98A) applies to 'category A designated
matters' and 'category B designated matters', (as defined under proposed
subclause 98A(1)). These categories are discussed in further detail below.
a) Category A designated matters
Subclause 98A(2) provides an exemption from stamp duty or other tax under a
law of a State or Territory in respect of a 'category A designated matter',
or anything done (including a transaction entered into or an instrument or
document made, executed, lodged or given) because of, or for a purpose
connected with or arising out of, a 'category A designated matter'.
Category A designated matters cover five separate matters which are listed
at proposed (a)-(e) of the definition of that term.
The first and second matters (at proposed paragraphs (a) and (b) of the
definition) are intended to cover the migration of customer services from
Telstra's fixed-line and hybrid fibre-coaxial networks to the new wholesale-
only fibre network to be built and operated by NBN Co. The paragraphs use
similar language to that used in section 577BC of the Tel Act, which sets
out the requirements for a migration plan (which forms a part of Telstra's
structural separation undertaking). The effect of these paragraphs is
that, where Telstra takes action involved in the migration of customers
from a network over which it is in a position to exercise control, and that
action is authorised under section 577BA of the Tel Act for the purposes of
subsection 51(1) of the CCA, the action will be a category A designated
matter, and as such exempt from State and Territory stamp duty and other
taxes. The reference in these paragraphs to the action being authorised
under section 577BA of the Tel Act is included to ensure that the migration
actions that benefit from the exemption are constrained to those actions
that are authorised under that section for the purposes of Part IV of the
CCA. Under section 577BA of the Tel Act, a range of actions are authorised.
A detailed description of the operation of that provision is set out in
the Explanatory Memorandum for the TLA(CCS) Bill.
The third category (at proposed paragraph (c) of the definition) covers the
receipt of money by a person in respect of a matter covered by proposed
paragraphs (a) or (b).
The fourth category (at proposed paragraph (d) of the definition) covers
any agreement between Telstra and an NBN corporation relating to a matter
covered by proposed paragraphs (a) or (b) where, at the time the agreement
is entered into, a structural separation undertaking is in force.
The fifth category (at proposed paragraph (e) of the definition) covers any
agreement between Telstra and an NBN corporation relating to a matter
covered by proposed paragraphs (a) or (b) where the operative provisions of
the agreement are subject to a condition precedent relating to a structural
separation undertaking coming into force.
The question of when a structural separation undertaking comes into force
is dealt with by section 577AB of the Tel Act.
Paragraph (e) of the definition is intended to deal with agreements between
Telstra and an NBN corporation that deal with the topic of migration of
customers and that are entered into prior to a structural separation
undertaking coming into force. The reference in paragraph (e) of the
definition of category A designated matter to 'operative provisions' of an
agreement being subject to a condition precedent reflects language used in
subsection 577BA(3) of the Tel Act, and is intended to acknowledge that
there may be some provisions in such agreements (such as provisions
relating to confidentiality) that take effect from the time the agreement
is entered into.
The concept of 'control' is used in the definition of the first type of
category A designated matter at subparagraph 98A(1)(a). Subclause 98A(6)
provides that for the purposes of Section 98A, control over a
telecommunications network is to be determined under Division 7 of Part 33
of the Tel Act. Section 577Q in that Division sets out, for the purposes of
Part 33, when Telstra is in a position to exercise control of a
telecommunications network.
b) Category B designated matters
Subclause 98A(4) provides an exemption from stamp duty or other tax under a
law of a State or Territory in respect of a 'category B designated matter',
or anything done (including a transaction entered into or an instrument or
document made, executed, lodged or given) because of, or for a purpose
connected with or arising out of, a category B designated matter.
The definition of that term at subclause 98A(1) describes seven types of
matters to be 'category B designated matters'.
The first type of matter under the definition of category B designated
matter (at proposed paragraph (a) of the definition) relates to the
transfer of:
. conduits, fixed wires or cables; or
. any related equipment, apparatus or other thing used, or for use, in
or in connection with a conduit, wire or cable;
where such a transfer is for the creation, development or operation of the
NBN and where the transfer is authorised under section 577BA of the Tel Act
for the purposes of subsection 51(1) of the CCA. Subsection 577BA(7) deals
specifically with the authorisation of the disposal by Telstra of assets in
accordance with its structural separation undertaking, and the acquisition
of those assets by parties identified in that undertaking.
The reference to "thing" in this context is intended to cover such upstream
and downstream connections at each end of the conduit as may be transferred
to NBN Co. These things may not normally be considered 'apparatus or
equipment'. In respect of the upstream connections, the reference to
"things" is intended to include things such as a lead-in conduit to a
medium density fibre board, optical fibre distribution frame, T Block,
termination box, null node and other things placed on the relevant premises
beyond which there is no continuous pipe.
The second type of category B designated matter (at proposed paragraph (b)
of the definition) relates to Telstra granting an NBN corporation access to
a telecommunications facility owned or operated by Telstra (such as
telecommunications equipment, dark fibre, a building, a tower, or an
underground facility which is used to hold lines), where such access is for
the creation or development of the NBN, and where such access is authorised
under section 577BA of the Tel Act for the purposes of subsection 51(1) of
the CCA. The giving by Telstra of such access could be authorised for the
purposes of the CCA under subsections 577BA(3), (6) or (8) of the Tel Act.
The third type of category B designated matter (at paragraph (c) of the
definition) relates to Telstra giving an NBN corporation access to the site
of a telecommunications site (e.g. the site of a telecommunications
building, or of a tower, or of an underground facility which is used to
hold lines), which Telstra owns, occupies or controls, where such access is
for the creation or development of the NBN, and where such access is
authorised under section 577BA of the Tel Act for the purposes of
subsection 51(1) of the CCA. It is envisaged that this access would be
given to enable an NBN corporation to situate a telecommunications facility
for the purposes of the NBN on that site. As above, the giving by Telstra
of such access could be authorised for the purposes of the CCA under
subsections 577BA(3), (6) or (8) of the Tel Act.
The fourth type of category B designated matter (at paragraph (d) of the
definition) relates to Telstra supplying an eligible service to an NBN
corporation where such supply is for the creation or development of the
NBN, and where such access is authorised under section 577BA of the Tel Act
for the purposes of subsection 51(1) of the CCA. It is possible that, as
part of its structural separation arrangements, Telstra could supply
eligible services to NBN corporation to enable the NBN to be rolled out.
The supply of such services could be authorised under subsections 577BA(3),
(6) or (8).
As noted above, subsections 577BA(3), (4) and (5) will allow Telstra to
enter into agreements with NBN Co and other NBN corporations in the
expectation of the ACCC accepting a structural separation undertaking that
is submitted to it.
It is noted that the concept of giving access is intended to cover access
powers under Part 3 or Part 5 of Schedule 1 to the Act, or access pursuant
to a lease or any other form of access. The inclusion of paragraphs (b),
(c) and (d) of the definition of category B designated matter is not
intended to suggest that the fact of granting access to a facility, or
supplying an eligible service, is of itself a transaction that could give
rise to a stamp duty.
The remaining types of category B designated matter (at paragraph (e), (f)
and (g) of the definition of that term) mirror the types of category A
designated matter described at paragraphs (c), (d) and (e) of the
definition of that term. These provisions apply in a similar way.
Sunset Clauses
The sunset clauses for the designated matters (as described below) ensure
that the exemption does not continue into the future, when other business
as usual transactions would be subject to State/Territory laws regarding
stamp duty and other taxes.
The proposed stamp duty and tax exemption for category A designated matters
(under proposed subsection 98(4)) ceases to operate 24 months from the day
that the Communications Minister makes a declaration under section 48 of
the Companies Bill that, in the Communication Minister's opinion, the NBN
should be treated as built and fully operational (see subclause 98A(3)).
The timeframe aligns with the migration timeframe proposed for the NBN.
The migration of customers is expected to commence during the rollout of
the NBN and proceed on an incremental basis, but continue for up to 24
months after the NBN is built and fully operational. Accordingly, the
timeframe covers the additional period after the rollout that is necessary
to complete the migration.
The proposed stamp duty and tax exemption for category B designated matters
(under subclause 98A(4)) ceases to have effect from the day that the
Communications Minister makes a declaration under section 48, that, in the
Communication Minister's opinion, the NBN should be treated as built and
fully operational (see subclause 98A(5)). This expiration trigger point is
selected because any transfer of a conduit, wire or cable, or giving of
access to a facility, site or service, is expected to have been completed
by the time the roll out of the NBN is complete.
Transitional definitions
Proposed subclause 98A(7) is necessary because of the proposed
retrospective commencement of new clause 98A (see amendment (1) above). It
ensures that key definitions set out under the Companies Bill are treated
as having been in force from 22 March 2011 (the date of commencement of
clause 98A) until the date that section 5 of the Companies Act commences.
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